Bitwise analyst: Bitcoin may continue to decline in the coming weeks, and the Federal Reserve is con

According to CoinDesk, the head of research at Bitwise Europe, after accurately bullish on Bitcoin (btc) in the past few months, downgraded to cautious on the Bitcoin market last week and warned that there may be even greater declines in the coming weeks.

Bitcoin will continue to face headwinds in the coming weeks

According to market data, Bitcoin fell 8.8% last week to the level of $95000, the largest weekly decline since August. According to previous reports from Zombie, the reason for this decline is that the Federal Reserve has hinted at a possible reduction in interest rate cuts next year, emphasizing that it is not allowed to hold Bitcoin and has no intention of changing relevant laws.

The so-called hawkish interest rate forecast also shook the sentiment of traditional financial markets, causing the S&P 500 index to fall by 2% and the US dollar index to rise by 0.8%, reaching its highest level since October 2022. The yield of the 10-year US treasury bond bond, known as the risk-free interest rate, rose by 14 basis points, and the technical pattern showed a further bullish trend.

According to Andre Dragosch, Head of European Research at Bitwise, this risk aversion sentiment may continue for some time. Andre Dragosch said in an interview:

The overall macro situation shows that the Federal Reserve is in a dilemma. Despite three consecutive interest rate cuts since September, financial conditions continue to tighten. At the same time, according to the Truflation US inflation index, real-time consumer price inflation data in the past few months has accelerated again, reaching new highs

Andre Dragosch It is believed that Bitcoin may continue to face downward pressure in the coming weeks, but considering the ongoing tailwind brought about by the shortage of Bitcoin supply, this could be an interesting buying opportunity.

Will inflation repeat the pattern of the 1970s?

on the other hand, Andre Dragosch It is pointed out that the persistently high CPI inflation data in recent months has raised concerns among the Federal Reserve about the possibility of a second wave of inflation, and therefore has to become more cautious in cutting interest rates.

They may be concerned about a bimodal inflation scenario similar to the 1970s, which is also the reason why they have been hesitant to cut interest rates significantly. They are worried that if they cut interest rates too aggressively, it may lead to rapid inflation acceleration; but if nothing is done, the economy may be hit hard

However, Dragosch Furthermore, as yields rise and the US dollar index climbs, the resulting financial tightening will ultimately force the Federal Reserve to take action. He emphasized that the scarcity of supply for Bitcoin will be an important positive factor supporting its price in the long run.