Crypto has been a hot topic of discussion in the last few years. The currency which was once the exclusive domain of early adopters and tech-savvy enthusiasts has recently been adopted by mainstream investors, institutions, and even banks. This new wave of interest in crypto is arguably one of the most exciting periods to be alive. As we enter into a new era where crypto is being taken more seriously as an investment, it’s important to understand how macro trends are impacting this market.
Global macro expert Raoul Pal says crypto assets are currently experiencing a massive stress test and could experience even more downside risk in the near future. He warns that the global geopolitical risks could have a bigger impact on bitcoin as opposed to other crypto assets.
Although the crypto markets look rough right now, the underlying technology powering cryptocurrencies is going smoothly despite the downward pressure, says the former Goldman Sachs executive.
‘So, we are currently undergoing a decent stress test, as we did last year. Apart from some new chains clogging and the partial Maker liquidation, are there any issues? Or are things running relatively smoothly here in DeFi and elsewhere? That is the main thing for me…”
A recent liquidation within MakerDAO (decentralized autonomous organization) has been referred to by Pal, who in the end ended up being less severe than originally thought.
If someone is able to call up this 7 Siblings guy within 30 minutes, Maker will dump $600 million worth of ETH on the market.
I’m confident the Dutch Auctions will hold up but not sure how the market will reacthttps://t.co/DPQzPQWLOY
— Rune (@RuneKek) January 21, 2022
As the CEO of Real Vision illustrates, Bitcoin’s volatility is similar to that of the tech giant Amazon when it began. The chart patterns of Bitcoin today are similar to those of Amazon in 2010.
“And here is BTC post-recovery when rates threaten to rise.”
In 2010, when rates threatened to rise following the recovery, Amazon (AMZN) struggled to hold onto its shares. Amazon (AMZN) has rallied 3,330% since 2010, reaching all-time highs of $3,773 in 2021.
According to an investor on a recent episode of Real Vision Finance, macroeconomic factors have pulled down the crypto markets, and there is still more downside potential for both stocks and digital assets.
Nevertheless, Pal says the correction for cryptocurrencies is likely near its end.
“My view is that markets continue to be volatile for a bit. There’s some more downside to come. If we look back and examine Nasdaq or Amazon over that period, we’d see these kinds of 20% drawsdowns, 15% drawsdowns, and then the market explodes high again as the central banks start realizing they can’t raise rates as fast, and then the market does, and then the market does, and then everything stabilizes yet again as things move forward.
This is basically my base hypothesis here. Could we have further downside? Could the Nasdaq be forming a head-and-shoulders top? It’s certainly possible for Bitcoin to be affected by that. I’ve been saying for a while that Bitcoin’s downside is probably $30,000. I think we’re in a good buying zone. I’m thinking about adding ETH here at the moment between $2,800 and $2,600.
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Author
Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.
