Entrepreneur and investor Anthony Pompliano is of the opinion that Bitcoin investors have stepped into a new market cycle with the decline in inflation. He states that Bitcoin’s basic investment rationale has been tested recently. Pompliano states that investors have turned to Bitcoin for many years, especially during periods of high inflation, and emphasizes that the current decline in inflation has significantly tested the faith of investors.
Slowdown in Inflation and the Main Reason for Bitcoin
The slowdown in inflation is causing controversy in the cryptocurrency market. According to Pompliano’s assessment, the general expansion of the money supply is more effective in Bitcoin’s price movements than short-term consumer price index changes. Drawing attention to this point, Pompliano expresses his opinion as follows: “The real test facing investors is whether they can continue to stay in Bitcoin when high inflation does not appear every day.”
According to the latest data from the US Bureau of Labor Statistics, inflation fell to 2.4 percent in January. Moody’s Analytics chief economist Mark Zandi stated that the improvement in statistics may not be felt in daily life. Proponents of Bitcoin maintain the view that the asset offers a long-term hedge against loss of monetary value, thanks to its limited supply.
Weakening Market Sentiment and Macro Developments
There has been a significant weakening in market expectations in recent weeks. The Crypto Fear and Greed Index dropped to 9 points, a low not seen since June 2022. At the time the news was published, the Bitcoin price was approximately $68,850 and has decreased by 28 percent in the last month.
Pompliano predicts that volatility may continue in the short term due to global macroeconomic conditions. It is stated that deflationary pressures may come to the fore temporarily, and then there may be a revival with interest rate cuts and new liquidity steps by central banks. Pompliano thinks that the current situation may create a “monetary slingshot” effect, that is, even if prices decline for a short time, money printing will come to the fore again in the long run.
Impact of US Employment Data on Bitcoin
The revision of the latest employment figures published in the USA also shook the market. Last year’s employment data was adjusted to cut nearly 900,000 jobs, weakening overall economic confidence. A modest increase of 130,000 people was recorded in January. Doubts about data reliability have increased volatility in risky assets.
Immediately after these developments, US Treasury bond interest rates also increased. The 10-year bond interest rate increased from 4.15 percent to 4.20 percent, and interest rate cut expectations decreased rapidly. In derivative markets, institutional investors increased their hedging transactions.
According to economists, employment reports based on previous estimated data may have been too optimistic due to structural changes. The volatility in the bond market still stands out as a very determining factor for Bitcoin.
Although some investors think price bottoms may be near, overall market movements do not yet point to a strong recovery.
