Currency.com fundamental analysis: market recovers thanks to inflation

On June 22, Bitcoin for the first time in a month breached the $30,000 level, but quickly rebounded from support and reached $34,000. The stock market experienced a mild correction on June 16 and also recovered.

Currency.com crypto-exchange analyst Mikhail Karkhalev explained the conditions under which Bitcoin could reach $48,000, why the NASDAQ 100 did not react to the Fed’s actions, and what is driving oil higher.

Cryptocurrency

Bitcoin’s month-long consolidation in a sideways trend did not culminate. On June 16 buyers failed to push above the $40,000 zone amid weak demand, and on June 22 sellers lacked the strength to hold below $30,000.

Many traders expected the bear trend to continue and further price declines. Sellers pushed Bitcoin to $28,800 but did not test the May low of $28,640. For several hours, the price at high volumes returned to the range between $32,000 and $40,000.

Traders are ready to buy cryptocurrencies at current prices. If Bitcoin returns to the $40,000 level, it could break the resistance, rise to $48,000 and restore the bullish trend.

The cryptocurrency market is unlikely to continue falling. Investors have no compelling reasons to sell Bitcoin and move into equities.

Equity markets

Although the Fed signalled further rate hikes, equity markets and other risk assets recovered quickly. The market dipped slightly on the rate news, but the fundamental factors had not changed. For example, a week earlier the volume of reverse repo trades stood at $585 billion, and by June 23 it had risen to $800 billion. Investors are increasingly flush with liquidity, and they are looking for places to put it.

The Fed attempted to curb inflation by raising the IOER rate from 0.10 to 0.15 percentage points. As a result, money-market funds and government-sponsored enterprises found it more advantageous to hold funds on the Fed’s balance sheet rather than in bank deposits. Now the Fed competes with banks: they improve deposit terms and siphon off excess capital from the markets.

Despite the IOER increase, the volume of reverse repo operations rose by nearly 50% over the week. The Fed is unlikely to curb inflation quickly with such an excess of liquidity. Investors will continue to seek assets that protect their fiat money from debasement and yield returns.

Together these factors pushed the NASDAQ-100 to an all-time high of 14,329.3. The index did not even register a correction in the wake of the Fed meeting on June 16. The value of tech companies continues to rise.

Commodity markets

The price WTI crude oil could reach $80 in the near term. In April 2019 the United States imposed an embargo on Iranian oil, causing a deficit in the market.

On July 1, OPEC+ will discuss Iran, but a deal is unlikely. Russia may propose increasing OPEC+ quotas from August. Most likely Saudi Arabia will oppose, as it would benefit from higher oil prices.

If OPEC+ keeps quotas unchanged, the price of the Texas benchmark WTI could reach $80 per barrel.