While fervent crypto enthusiasts rejoice in the prospect of a Bitcoin bull market, there’s a cloud of caution that subtly permeates the sunny plains. ARK Invest, an institution heralding the intersection of Bitcoin and Artificial Intelligence, offers a forward-looking yet cautionary perspective.
The strength of cryptocurrencies hinges tightly on the whims of macroeconomic factors, from interest rates to inflation, the gross domestic product (GDP), and unemployment. Here, the crystal ball of predictability fogs over as ongoing economic headwinds loom. As ARK points out, the U.S. Federal Reserve’s first restrictive monetary policy since 2009, signaled by the “Natural Rate of Interest”, bears impending influence on the crypto market.
This rate, a theoretical point of balance where the economy neither expands nor contracts, exerts pressure on lending and borrowing rates when exceeding the “Real Federal Funds Policy Rate”. When considering recent speculation around slowing inflation, ARK presents a slight rain on the crypto parade.
Interestingly, ARK also casts a spotlight on the separation of the GDP and Gross Domestic Income (GDI). An equilibrium between the two is a presumed standard; however, the current economy reflects a 3% higher Real GDP than Real GDI. These figures point towards potential downward revisions in production data, an aspect not quite in favor of a Bitcoin bull rush.
Meanwhile, another gray cloud looms in the U.S. employment sector where downward revisions have unfolded for six consecutive months. This paints a labor market enfeebled, eerily reminiscent of the Great Financial Crisis of 2007.
ARK further adds the warning shape of “stagflation” to this cloud of economic hurdles. This happens when the one-year trend of price discounts erodes due to increased consumer spending – a situation that’s already starting to shape.
While the cryptoverse is shouting ‘bull run’, these ongoing macroeconomic uncertainties don’t confirm a smooth journey ahead. The scenario paints an unfavorable picture for an immediate bull run, with the potential for lower economic growth and higher inflation. These conditions are usually ominous for risk-on assets, the category under which cryptocurrencies squarely fit. This does not, by any means, rule out the bull but signals prudent observation and perhaps, a touch of caution.
While the investment firm ARK Invest acknowledges the transformative potential of Bitcoin and Artificial Intelligence interplay, the investors and followers of the crypto industry are left to ponder on this duality of prospective gain and persisting uncertainty. Safe sailing, or full steam ahead in the proverbial storm? Only time, and market, can tell.
Source: Cointelegraph
