The big query as to whether or not the crypto market lost its shine in 2018 owing to the US Federal Reserve’s policy of interest rate hike is still debatable; one needs to shift focus and answer what prospects holds forth for the investors by the central bank in the days to come.
A senior trade analyst at eToro, Mati Greenspan, concluded that the Fed’s tightening policy could be one of the reasons for the market to collapse drastically in 2018. In a seminar, he stated that to come out of a critical situation the Fed’s buying of bonds had led to widespread selling of US stock, shares and even the digital assets. This was the reason why money was pulled out of the market, and the buying strategy by the investors was put to hold.
Some analysts are of the opinion that the tightening policy would be carried on till the Fed balance sheet positions itself under the $3.6 – $3.7 trillion bracket. But the period taken to achieve that target is still unknown.
Morgan Stanley economists believe that this process of bond selling would not stop before September or even till October as said by TD Securities. Barclays has forecasted it to stop at somewhere around the middle of 2019 or continue till the year-end. Deutsche Bank has predicted the bond selling to be carried out till 2019 end while UBS has positioned its forecast of touching the $3.5 trillion to happen somewhere around June the next year.
With all these statistics and analysis one can come to a derivation that it will be difficult for Bitcoin to exit from its bearish trend. Other markets including S&P 500, Nasdaq and Dow Jones would have a similar fate.
The current trade conflict between China and the US will have adverse effects as the US government enters its shutdown for the nineteenth day. This could hamper the deal which is to be closed on 1st March, or an extension could be around the corner. According to Greenspan the GDP falling below 6% could also be because of the trade war between the two countries.
The economic tightening against some of the upcoming markets namely Venezuela, Iran, and Turkey would find the dollar in a better position. These markets would breathe easy if the Fed paces down its pulling out money policy from the market.
Supporters of the digital assets are hopeful that investors would turn to Bitcoin for wealth accumulation because of the dollar-less market. This supposition along with an influx of money by giant institutions could pave the way for the bulls to start their rally by the middle of 2019.
Politics is also a major factor when investment options are taken into account. The trade war and Brexit according to Greenspan is reason enough for the market to be uncertain but could favor short term gains by investors. Any delay in the decision of UK exiting from Europe leaving the judgment on a general election could make UK securities and Sterling in total turbulence. In contrast, if Brexit happens as per schedule, the UK market would stabilize.
Greenspan was not very happy with the fact that Ripple Labs held most of the XRP tokens which could be either security or utility according to the SEC. He believes that branding XRP as a security token will make the market slide as it works as a utility.