Financial markets suffered a sharp decline on Tuesday amid concerns about rising inflation and interest rates. Investors took a step back as recent economic indicators pointed to rising inflation risks, which weighed on stocks, gold, and Bitcoin.
Financial markets fall after Fed chairman's remarks
Major financial indexes such as the S&P 500, Dow Jones and Nasdaq all fell in Thursday trading after Federal Reserve Chairman Jerome Powell said the Fed had no reason to rush to cut interest rates. A new report on the Producer Price Index (PPI) showed that inflation is likely to rise faster than expected, raising concerns among investors that the Fed will maintain high interest rates for an extended period. Stocks of major companies fell in response to Powell's comments as investors decided to take a step back and watch the situation.
Gold and Bitcoin were also not spared from the downward trend. Gold fell slightly by 0.3% to $2,564.70 an ounce. Meanwhile, Bitcoin also fell by 0.54% to $88,255. Analysts at Secure Digital Markets said Bitcoin was in the $89,000-$91,000 range before falling to $88,300 after the US market opened. However, experts remain positive about Bitcoin's long-term prospects as investment flows through cryptocurrency exchange-traded funds (ETFs) surged, with investments reaching $4.7 billion this week.
Can Bitcoin Hit $180,000?
Bitcoin has the potential to reach $180,000 next year, which would represent a 1,000% increase from the bottom to the top of this cycle, according to Matthew Sigel, director of digital asset research at VanEck. Sigel believes that Bitcoin’s bull run is still in its early stages and predicts that prices could reach new highs in the next two quarters.
Sigel also noted that previous strong Bitcoin price increases occurred after US presidential elections, when Bitcoin doubled just months after the 2020 election. He hopes that support from the current administration will continue to drive the crypto market forward.
The rise of Bitcoin ETFs has attracted many institutional investors who are moving capital into the cryptocurrency market. Sigel said he has received many calls from investment advisors expressing their desire to increase their Bitcoin investment from 1% to 3% of their total assets. This creates a new flow of capital into the market, contributing to the long-term price increase of Bitcoin.
Bitcoin is currently in the neutral zone of a two-year uptrend channel, according to experts from TradingView. However, technical indicators still show significant upside potential, with a mid-term target of $94,500 and a long-term target of $140,000. Significant corrections may only occur when the RSI (relative strength index) crosses overbought levels (>70), as it has done in previous bull runs.
