Matrixport, a crypto exchange and lending platform, said it has been bullish on digital assets since mid-December, but signals from the US economy are now forcing it to be more cautious.
In a research report published early Friday, the firm said it’s still not the time to go fully bearish, but suggested cutting exposure by 50% if Bitcoin (BTC) prices dip below $22,800 fall. The largest cryptocurrency by market cap plunged overnight and was trading around $22,400 at the time of publication.
US stock markets have started a sell-off again and US bond yields are rising, the release said. The 2-year Treasury yield is now around 4.87%, above the November 2022 high of 4.8%, and the difference, or spread, between the 2-year and 10-year yields is up an “unhealthy level of -0.87%”.
The strengthening US dollar is another negative sign and “complements the restrictive monetary policy overhang,” wrote Markus Thielen, Head of Research.
Daily crypto trading volume has dropped from around $80 billion to $60 billion, showing less interest from traders to engage with the crypto market, “while ongoing outflows from the Paxos-Binance (BUSD) stablecoin add to this have caused the market cap to drop to what is now $10 billion,” the report said. A stablecoin is a type of cryptocurrency whose value is pegged to another asset, such as the US dollar or gold.
The 60-day correlation between Bitcoin and the Nasdaq stock index is at its lowest since December 2021, when the Federal Reserve first began telling the market that rate hikes were on the horizon, the report noted.
“This correlation breakdown supports holding long crypto exposure as investors can hold onto future tech growth expectations while the downside of the macro data appears stronger for US-listed tech stocks.”
Matrixport said it remains convinced US inflation will fall sharply this year and that as a result the Fed will halt raising rates and prepare the market for a recovery rally.