Why Bitcoin’s Road Beyond $100,000 Might Be Tougher Now

the largest cryptocurrency The market cap has fallen by about $80 billion since the start of the year, bringing it to its lowest level since the flash-crash in early December. But forecasts have surfaced that it could still hit the $100,000 level at some point this year.

To reach that milestone, it would have to more than double the current level to $42,900. Analysts say it’s not that it can’t — it has posted much higher triple-digit annualized returns over the past decade — but that the road ahead could be more difficult for the cryptocurrency with a more storied Fed.

“Cryptocurrencies have benefited from the Fed’s massive liquidity injections since 2020,” said Matt Malee, chief market strategist at Miller Tabak + Co. It moved these assets very quickly.

U.S. equities, in combination with riskier assets such as bitcoin and other digital assets, declined on Wednesday minutes after the recent Fed meeting, indicating that officials may be withdrawing stimulus sooner than previously expected. Were prepared.

The release pointed to earlier and faster rate hikes by the central bank, which would increase the cost of capital across the economy. This has the potential to keep investors away from cryptocurrencies, many of whom have made huge gains over the past two years amid huge incentives.

But not everyone agrees that this environment is bad for crypto. According to Mike McGlone of Bloomberg Intelligence, bitcoin is a risk asset developing into a digital-reserve asset in a world that goes like this – and it has positive implications for the price.

The coin is “heading towards $100,000,” he wrote in a note. “Crypto is at the top between risk and speculation. If risk assets decline, it helps the Fed fight inflation. Once a global reserve asset, bitcoin could be a primary beneficiary in that scenario.”

Still, that hasn’t stopped other industry players such as Messari Inc. co-founder Ryan Selkis from poke fun at the sky-high predictions.

And earlier this week, Goldman Sachs analyst Zach Pundle wrote that bitcoin could reach $100,000 if it continues to take market share out of gold.

Bitcoin has recently hit the tune of the stock market, with the coin’s 100-day correlation coefficient and the S&P 500 now standing at 0.44. This is the highest reading since the fourth quarter of 2020. A coefficient of 1 means the assets are moving in lockstep, while a minus -1 would show that they are moving in opposite directions.

“Now that this stimulus is going to decrease more quickly than the market imagines, it makes sense that these assets are falling,” Maley said.

Investors were already entering the year because of uncertainty over the Fed’s policy path, says Lindsey Bell, Ally’s chief market and currency strategist.

“People are re-evaluating the risk they want to take,” she said over the phone. It doesn’t help that the dollar has strengthened as well, which serves as a reminder to crypto investors that it is “still the currency of the world and it is still very strong and it is going nowhere, and So you don’t need to hide your money under your mattress or in cryptocurrencies.”

Greg Basuk, chief executive of AXS Investments, an asset-manager with a focus on alternative investments, says bitcoin should comprise a portion of an investor’s portfolio.

“We are cutting down on all the noise on bitcoin and digital assets day in and day out,” he said in an interview. “Digital assets will be treated like commodities, equities and bonds, and real estate, and other traditional asset classes for years to come.”