Although being bullish on digital assets since mid-December, Matrixport, a cryptocurrency exchange and loan platform, claimed that indications from the U.S. economy are suddenly making it more concerned.
The company proposed lowering exposure by 50% if bitcoin (BTC) prices fall below $22,800 in a research paper that was released early on Friday, but it did not say it is now time to be blatantly pessimistic. By market capitalization, the biggest cryptocurrency fell over night and was trading at about $22,400 at the time of publication.
The report noted that U.S. stock markets have started to decline once more and that U.S. bond yields are rising. The spread, or difference between the 2-year and 10-year yields, is at a “unhealthy level of -0.87%,” and the 2-year Treasury yield is currently about 4.87%, above the high of 4.8% from November 2022.
A further warning indication is the strengthening of the dollar, which “increases the restrictive monetary policy overhang,” according to Markus Thielen, head of research.
Daily crypto trading volumes have fallen from around $80 billion to $60 billion, indicating a decline in investor interest in the cryptocurrency market, the report said. “While the ongoing outflows from Paxos-Binance (BUSD) stablecoin have resulted in the market cap declining to now $10 billion,” it added. A stablecoin is a kind of cryptocurrency that has its value tied to another asset, like the US dollar or gold.
According to the analysis, the 60-day correlation between bitcoin and the Nasdaq stock index is at its lowest point since December 2021, when the U.S. Federal Reserve first began informing the market that interest-rate increases were imminent.
This correlation breakdown “supports retaining long crypto exposure as investors may hang onto the future technological growth expectations whereas the downside from macro data appears to be more damaging for U.S. listed technology equities,” according to the report. The Fed will ng to Matrixport, which will allow the market to rise in response.