Andre Dragos, head of Bitwise's research division in Europe, who has long been optimistic about Bitcoin (BTC), is now warning of a potential significant drop in the cryptocurrency in the coming weeks, according to CoinDesk.
According to TradingView and CoinDesk Indices, the price of Bitcoin has dropped by 8.8%, falling to nearly $95,000. This is the largest decline since August 2024. The decrease comes in the wake of statements from the Federal Reserve regarding fewer expected rate cuts next year, as well as reminders about the ban on holding BTC.
"Birdish" predictions regarding interest rates have also negatively impacted traditional markets. The S&P 500 index dropped by 2%, while the dollar index rose by 0.8%, reaching its highest level since October 2022. Additionally, the yield on 10-year Treasury bonds, known as the risk-free rate, surged by 14 basis points, surpassing the technical pattern.
"The overall macroeconomic picture shows that the Federal Reserve is caught between a rock and a hard place, as financial conditions continue to tighten despite three consecutive rate cuts since September. Meanwhile, real-time consumer price inflation has accelerated again in recent months, reaching new highs, according to U.S. inflation data," says Dragos.
Dragos is one of the few analysts who accurately predicted the rapid rise in the value of BTC at the end of July, when the market showed little optimism. At that time, the price of Bitcoin fell to a low of $50,000, but recently it surpassed $100,000 for the first time in history.
""Therefore, it's quite likely that we will see more pain in the coming weeks, but it could present an interesting buying opportunity, given the consistent tailwinds created by the ongoing BTC supply deficit," added Dragos.
By the way, Dragos notes that the low Consumer Price Index (CPI) readings in recent months have raised concerns at the Fed about a potential second wave, leading to a more cautious stance on rate cuts.
""They're likely concerned about the double hump scenario and a resurgence of the double peak inflation of the 1970s, which is why they're likely hesitant to aggressively cut rates," says Dragos. "They risk significantly accelerating inflation if they aggressively lower rates, but if they do too little, the economy could suffer."
Ultimately, the financial tightness driven by rising yields and the strengthening dollar will compel the Fed to take action. Dragos highlights that the BTC supply deficit will remain a key "bullish" factor in the long term.