The crypto market was shaken last week by a hack of Bybit, which led to concerns about possible price manipulation. The price of Bitcoin fell shortly after the announcement of the hack, but managed to recover somewhat. Nevertheless, experts are warning of further declines, partly due to macroeconomic factors and regulatory uncertainty.
Economic uncertainties and stagflation
According to a new Bank of America survey of global fund managers, there is growing expectation that the US will face stagflation within a year. This economic scenario, in which slow economic growth is accompanied by high inflation, could have a negative impact on the crypto market. Jack McIntyre, portfolio manager at Brandywine Global, emphasizes that policy measures that harm consumer demand while inflation remains stubbornly high limit the Federal Reserve’s room for maneuver.
Bitcoin drops below $90,000
On February 25, the Bitcoin price fell below $90,000, which is the lowest level since the price increase after Donald Trump’s election victory in November. The Crypto Fear & Greed Index, which measures market sentiment, fell to the “extreme fear” zone. Major currencies such as Ethereum, Solana and XRP also lost between 10% and 15% of their value within 24 hours.
Geoff Kendrick, head crypto analyst at Standard Chartered Bank, believes that Bitcoin is performing relatively strongly within the crypto market, but is currently caught in a broader risky market environment. He predicts that the price could fall to around $80,000, partly due to large-scale outflows of funds from Bitcoin ETFs. “Before ‘buying the dip’ becomes attractive, I expect a day with $1 billion in ETF outflows,” Kendrick warns.
The role of the Fed
The Federal Reserve began lowering interest rates in September, but has since hit the brakes due to ongoing inflation concerns. This has slowed Bitcoin’s upward trend. Market analysts now estimate a 97.5% chance that the Fed will leave interest rates unchanged at its next meeting in March, while a month ago this chance was still at 75.5%.
In addition, the Fed’s favorite inflation measure, the PCE price index, will be published later this week. It is expected to remain above the 2% target, making further interest rate cuts unlikely in the short term. According to some analysts, the Fed could even consider raising interest rates further.
