What you need to know about this “high risk” bitcoin item

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In August, digital assets made a strong comeback after nearly three months of consolidation and slowdown. In fact, Bitcoin and Ethereum were the real winners, with the S&P 500 and Nasdaq Composite ending the month with all-time highs. “BTC and ETH versus stocks” is an ancient and never-ending debate, and the correlation between the two has become a fairly common story over the years. While the differences between the two classes have been noted well in the past, a strong correlation between Bitcoin, other cryptocurrencies, and stocks is a story that has been eclipsed. Bitcoin, crypto and stocks: everything is connected! The market has been inundated with reports and analysis on how Bitcoin would not be affected by the larger market. However this is not entirely true. Take, for example, the price drop in March 2020. Bitcoin and almost all other cryptocurrencies felt the same. After COVID hit the United States, the stock market experienced a major correction, as did gold and bitcoin. At this point, the SP500 is down almost 35% from its previous high. With this in mind, the results of a recently published Ecoinometrics report should be read. More than $ 4 trillion has been added to the Fed’s balance sheet since the start of the pandemic. That’s more than the twelve years since the 2008 financial crisis. In fact, almost $ 3 trillion was added to the Fed’s balance sheet last year in just a few weeks. Right now, even though the figure is over $ 4 trillion, it is still important. It’s boring that this is more than in the twelve years since the 2008 financial crisis. As financial markets sink into liquidity, the stock market has broken new records. For example, the SP500 is up 34% from its pre-correction high in March 2020. If the Fed stops printing money in this case, there could be another liquidity crisis and Bitcoin would not have another bailout. Is Bitcoin risky? Unless the Fed continues to flood the market with more and more liquidity, it is more likely to get bigger corrections, according to the aforementioned report. Since corrections above -10% are very likely to affect other markets, this means that we will increase the risk of a negative impact on Bitcoin by 60% once the Fed begins to relax. This could mean that Bitcoin could hit a low of $ 20,000 if Bitcoin hovers around $ 50,000 and the market sees a> 10% correction. With inflation rising slightly, it is likely that at some point the Federal Reserve will try to end its asset purchase program. If the Fed does not raise its balance sheet, the chances of the stock market falling more than -5% are 30% higher and 60% more likely that it will fall more than -10%. When this happens, Bitcoin could see lower values, leaving the entire crypto market in a daze.

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