Crypto analyst Nicholas Merten has provided insight into the future trajectory of the Bitcoin price, suggesting that the flagship cryptocurrency may have turbulent times ahead.
The calm before the storm for Bitcoin
In a recent episode of his YouTube channel DataDash, Merton said Bitcoin, other altcoins and the broader asset market were on the verge of a major move as several macro factors converged. He went on to discuss how these various “dominoes” could “potentially cause a lot of pain in the economy.”
The first macro factor he mentioned was equities. According to him, the direction of equities and broader assets will see a “direct impact” on Bitcoin. He showed a direct relationship between the stock market and the crypto market when the coins started to rise at the beginning of the year, right when the former was peaking.
However, he pointed out that the stock market has been relatively quiet as the narratives designed to push the market higher have not worked enough. As such, he believes that if the shares please Those of Apple, Microsoft and Fang (basically the shares of major tech companies) do not start to rise, then there could be a “really big problem” (most likely involving the crypto market).
Reinflation is increasing
Another factor he highlighted was the inflation data. Merton seemed to suggest that the Fed was not doing enough to curb inflation and return it to the 2% target. According to him, the Fed could have taken a more stringent approach by raising rates by 75 basis points or even 100.
The inflation rate is known to have a significant impact on the crypto market because a higher inflation rate means that investors have little or nothing to invest in the crypto market. Merton noted that it is clear the Fed is not doing enough as prices of several goods and services (including energy) appear to be rising again.
He made a comparison to the 1970s, when inflation was also at a record high, and said that if this time is close to then or if there is a trend, it could be a “major problem.”
Some may argue that the 1970s were extreme times, especially with the oil embargo, which makes it different from this period. However, Merton noted that there is not much difference as we have the situation with the BRICS, which suggests that the world is de-globalizing and countries are less trusting of each other.
This would invariably impact trade deals and foreign relations, something Merton believes would involve “inflationary pressures,” and the Fed is well aware of this. He stated that the main reason we are experiencing this reinflation is because supply and demand are not in balance.
He says there is excess money in the system due to the “excessive printing of money” that has made people rich and the stimulus checks during the COVID era. As such, there is so much purchasing power without enough supply to meet this demand.
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Featured image from iStock, chart from Tradingview.com