Speculative Asset Pullback Could Boost Overall Market Stability
According to Jurien Timmer, director of global macro at Fidelity, a drop in speculative assets—such as meme stocks, SPACs, unprofitable tech companies, recent initial public offerings (IPOs), and Bitcoin—is definitely a good thing. He believed that the market as a whole may benefit from the decline in these highly speculative sectors. This is due to the fact that it assists investors and calms unreasonable excitement.
Despite Price Drop, Bitcoin’s Network Remains Strong
Timmer recently pointed out that the enthusiasm behind Bitcoin has vanished. He continued by saying that instead of serving as a safe haven, cryptocurrencies are now working as a risk amplifier. The cryptocurrency’s network is still strong, although there has been a decline in price.
Taking a step back and looking at Bitcoin’s power curve, we can see that despite Bitcoin’s drawdown below $100k, it remains more or less on track vs the power law model of its network,
Timmer
Analysts Say 20–30% Bitcoin Drop Is Normal, Not a Crash
According to several crypto-market observers, the decline was typical of a bull cycle‘s 20–30% correction. They stressed that it doesn’t mean the cycle is over. This is because they believe that these kinds of pullbacks usually shake away weak hands. Excessive leverage is lessened as a result. Richard Teng, the CEO of Binance, for example, recently stated that Bitcoin is in a healthy consolidation phase. He has linked the decline in Bitcoin’s price to the general downward trend impacting other speculative assets.
On the other hand, the cleansing of excess leverage is in progress, according to a recent argument made by Arthur Hayes. A wider liquidity drawdown, he continued, might pave the way for a recovery. He cautioned about the decline in monetary and macro liquidity. But he also claimed that Bitcoin might hit $200,000 to $250,000 if the Fed starts monetary easing again.
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