Yesterday, Bitcoin failed to break through the resistance of $42,000. Moreover, the whole day's growth was lost and the main cryptocurrency closed in the red zone.
Currently, the optimistic scenario looks like the asset is trading sideways within the range of $39,000 - $42,000. The situation remains uncertain.
The pessimistic technical scenario, in this case, would be a breakthrough of the current sideways support and a decline into the area of $37,000. However, as the history of falling this week has shown, the level of $39,000 is quite resistant to local shocks.
The Fed scares crypto investors
Bitcoin, and the rest of the crypto market following it, sagged after Federal Reserve Chairman Jerome Powell said interest rates should be raised faster to curb inflation. He said the central bank was considering a 0.5% rate hike in the following month.
Earlier, President of the St. Louis Fed James Bullard, said that he expected the interest rate to rise to 3.5% by the end of the year.
The rate hike factor generally remains bearish for cryptocurrency amid its correlation with the stock market, for which a tightening of monetary policy is unfavorable. However, the crypto market has probably already accepted the prospect of future hikes and has already priced them in.
Nevertheless, most investors seem to agree that today we have a good time to invest in Bitcoin. This is due to the fact that the current spike in inflation has caused stocks to crash, and investors have no idea how quickly the central bank intends to raise interest rates.
Harmful inflation issue
Inflation reached 8.5% last month, and the central bank intends to raise interest rates to curb this growth. There is also the concept of discounted cash flows, aimed at valuing fast-growing investments such as technology.
Rising inflation, geopolitical tensions, and central bank monetary policy tightening are some of the factors investors have had to deal with recently.
According to the minutes of the March meeting of the Fed, the central bank also plans to reduce its balance sheet by $95 billion each month.
"Carnage Indicator" for Bitcoin and cryptocurrency market
Famous fund manager and investor Peter Schiff described a carnage indicator for the cryptocurrency market and expects its realization soon.
According to the economist, the performance of crypto-related stocks like Coinbase can tell that digital assets will be performing in the future as numerous retail and institutional investors receive exposure to the crypto market via crypto-related stocks.
Whenever stocks are declining, investors expect similar moves in the cryptocurrency market as the distribution of funds on the cryptocurrency market often follows the performance of the stock market. Notably, Bitcoin's correlation with tech stocks remains high.
In contrast to Bitcoin's performance, Schiff displayed the movement of gold-related stocks that went through a strong correction on April 21 in addition to a $6 drop in the price of gold, but traditional assets have shown better performance compared to Bitcoin. For example, Valkyrie Miners ETF dropped by 35% since February, while gold mine-related investment products added 25%.
Bitcoin vs gold
Peter Schiff is known for his constant criticism of Bitcoin and his support of gold as a better investment instrument. Despite gold's poor performance over the past 10 years, Schiff still believes that the main cryptocurrency is "worthless" in the long run and should not be seen as a safe-haven asset or a hedge against inflation.
Gold remains one of the world's most popular protective assets against inflation because it has shown an extremely positive trend relative to the consumer price index over the past 50 years. At the same time, the price of gold shows a 36-fold increase relative to inflation of 6.8.
Bitcoin's path to $1 million
But not everyone is so critical of cryptocurrency. Its supporters continue to discuss its long-term prospects. Earlier this week, popular crypto analyst Jason Pizzino talked about Bitcoin's "path to one million dollars."
"A 25x might seem like it's a little far-fetched. But as we can see from December 2018 to the current top in 2021 in November, it's been a 22x return," Pizzino stressed.
"So 2,100% here. So it's not too far out of the question. But I just think it's going to take a lot more time than people are expecting," the analyst added.
Jason Pizzino believes that there are challenges that Bitcoin needs to decouple from the Nasdaq. "The problem lies with the Nasdaq itself being that we could be in for more downside in the Nasdaq which means more downside in Bitcoin and Ethereum and of course cryptocurrencies," he noted.
"Bitcoin needs to decouple from technology. It needs to decouple from the tech sector and it needs to go more in line with gold if it is to become a world reserve asset," Pizzino concluded.
The analyst is not the only supporter of such an optimistic target for the main cryptocurrency.
In early April, on the second day of the four-day Bitcoin 2022 conference, Catherine Wood, the Founder, CIO, and CEO of ARK Investment Management, LLC, said her company expected the price of Bitcoin to reach $1 million by 2030.
"We expect over the next eight years is that roughly two and a half percent of institutional assets are allocated to Bitcoin," Wood said.
