Stocks and crypto at the edge of ‘significant’ correction: 10x research

The stock and cryptocurrency markets could be “ahead of a crucial tipping point” heading for a significant price correction, according to Markus Thielen, the founder of 10x Research.

“We sold everything last night,” wrote Thielen, citing persistent inflation, decreasing rate cuts and a rising bond yield as the reasons behind his bearish outlook. In an April 16 research note, the founder wrote:

The primary trigger is the unexpected and persistent inflation. With the bond market now projecting less than three cuts and 10-year Treasury Yields surpassing 4.50%, we may have arrived at a crucial tipping point for risk assets.

The bearish research note comes after Bitcoin’s (BTC $63,142) price fell over 9.3% during the week to trade above the $63,400 level as of 9:15 am UTC, according to CoinMarketCap data.

The reason behind Bitcoin’s decline could be the falling expectations for an incoming interest rate cut, according to the research note:

Most of this 2023/2024 bitcoin rally is driven by expectations that interest rates would be cut, and this narrative is being seriously challenged now.

Traders are currently expecting rates to remain unchanged — 99% of market participants expect the Federal Reserve to maintain interest rates at the current 5.25%–5.50%, up from 93.6% a month ago, according to the CME Group’s FedWatch Tool.

Target interest rate expectation. Source: CME

Thielen added that the company sold all its tech stocks at the open during Monday’s trading session:

We only hold a few high-conviction crypto coins. Overall, we are bearish risk assets.

Is Bitcoin price overheated?

A key technical indicator suggests that Bitcoin price may be “overbought.”

On the weekly chart, Bitcoin’s relative strength index (RSI) is currently at 67, suggesting that the asset may be overheated. Yet Bitcoin’s RSI has cooled significantly from its 2024 high of 88, hit on March 24, according to TradingView.

BTC/USD, 1-week chart. Source: TradingView

The RSI is a popular momentum indicator used to measure whether an asset is oversold or overbought based on the magnitude of recent price changes.

Investor focus has shifted to the upcoming Bitcoin halving, prompting long-term holders to start selling and moving assets off exchanges.

As long as short-term holders absorb the supply, Bitcoin price could see a recovery, according to a Bitfinex research report shared with Cointelegraph:

There has been a shift in the makeup of the Bitcoin investor base, with new entrants (Short-Term Holders) absorbing the supply sold by Long-Term Holders (LTHs). This is evidenced by the rising Market Value to Realized Value ratio for STHs, albeit it is still below peak levels seen in previous cycles. If this dynamic of STHs absorbing LTH sell downs persists, then it could indicate room for further price growth.