Crypto research firm 10x Research is worried about the possibility of a significant price correction for risk assets, including stocks and crypto, with inflation being the main trigger.
What Happened: In an April 15 newsletter titled “We Sold Everything Last Night,” 10x Research writes that the narrative for a sustainable crypto bull market can’t simply be that U.S. baby boomers are buying Bitcoin (CRYPTO: BTC) because BlackRock suddenly promoted an ETF.
They believe there must be a broader portfolio allocation diversification approach to include Bitcoin in portfolios.
10x Research emphasizes the importance of understanding that trading is an ongoing game with high-conviction opportunities. They believe the key is to keep analyzing the markets and finding those opportunities when the odds are in your favor.
Risks: Persistent Inflation, Interest Rate Cuts
The research highlights the unexpected and persistent inflation as a primary trigger for a potential price correction. With 10-year Treasury Yields surpassing 4.50% and the bond market now projecting less than three cuts, they believe risk assets may be at a crucial tipping point.
They also worry that the Federal Reserve might not cut interest rates at all this year. This could challenge the narrative that has driven most of the 2023/2024 Bitcoin rally (past year gains at 112.2%), which is based on expectations of interest rate cuts.
Bitcoin halving tends to be bullish, at least initially: Sixty days after the last three Halving events, Bitcoin was up 16%, but returns were skewed to the 2012 post-halving return when prices rallied 45% higher.
The data indicated that the pre-halving 60-day window was bullish and predicted a rally towards 68,000, which happened. In contrast, the post-halving data still shows a 16% surge, with the returns only picking up after 50 days.
Bearish Stance
Overall, 10x Research is bearish on risk assets, including stocks and cryptocurrencies. They have sold all their tech stocks and only hold a few high-conviction cryptocurrencies. They are lightly positioned and are expecting to buy again at better levels.
