Analyst Flips on Bitcoin Before Halving, Cites Inflation & Yields

Key Takeaway

• Analyst Markus Thielen turns bearish on risk assets, including tech stocks and cryptocurrencies, citing persistent inflation and less anticipated Fed rate cuts.
• 10-year Treasury Yields hit 4.61%, diminishing the appeal of high-risk investments; inflows into Bitcoin ETFs have stalled.
• Bitcoin's year-to-date gain stands at 42%, but expectations for continued growth are challenged by economic conditions and upcoming halving event.

Market Sentiments Turn Bearish

Markus Thielen, the analyst known for accurately predicting Bitcoin's (BTC) bottom in November 2022 and its pre-halving surge, has shifted his stance towards a bearish outlook on risk assets, including technology stocks and cryptocurrencies. Thielen, the founder of 10X Research, expressed concerns over the unexpected and persistent inflation affecting the market. He noted, "Our growing concern is that risk assets (stocks and crypto) are teetering on the edge of a significant price correction." This statement comes in light of the bond market's projection of fewer than three cuts and the 10-year Treasury Yields surpassing 4.50%, signaling a potential tipping point for risk assets. Thielen's move to sell all tech stocks and only hold a few high-conviction crypto coins underscores the cautious approach towards the current market volatility.

ETF Inflows Dry Up

The U.S. Securities and Exchange Commission (SEC) had greenlighted nearly a dozen spot BTC exchange-traded funds (ETFs) in January, allowing investors to take exposure to the cryptocurrency without owning and storing it directly. Despite nearly $12 billion flowing into these investment vehicles, most of the inflows occurred last quarter, with demand fading this month. Thielen pointed out, "After an initial novelty hype, ETF flows tend to run out unless prices continue increasing—which they have not done since early March." The 5-day average of the net inflows into the spot ETFs has dropped to zero, indicating a significant decrease in investor interest and potentially contributing to the bearish market sentiment.

Pre-Halving Caution and Post-Halving Optimism

As the Bitcoin network approaches its quadrennial mining reward halving on April 20, the market exhibits mixed sentiments. The options market, in particular, shows a bearish sentiment leading up to the halving, with high open interest in $60,000 puts on Deribit. This suggests that investors are bracing for potential price volatility or a dip as the halving event nears. However, post-halving, the sentiment shifts towards optimism, with calls at $70,000 and $80,000 for late April indicating expectations for a rally. Simranjeet Singh from GSR highlighted a pattern where traders might initially react with short-term bearishness, only to pivot to a bullish stance as the market consolidates.

Street Views

• Markus Thielen, 10X Research (Bearish on risk assets including technology stocks and cryptocurrencies):

  "Our growing concern is that risk assets (stocks and crypto) are teetering on the edge of a significant price correction. The primary trigger is the unexpected and persistent inflation... We sold all our tech stocks last night (at the open) as the Nasdaq is trading very poorly and reacting to the higher bond yield. We only hold a few high-conviction crypto coins. Overall, we are bearish risk assets (stocks + crypto)."