Is a Crypto Correction Approaching? Analyzing the Influence of Economic Indicators and Federal Reserve Policy
Renowned crypto analyst Benjamin Cowen is closely monitoring the potential effects of Federal Reserve rate cuts and upcoming economic data releases on the digital asset market, specifically Bitcoin and altcoins. He suggests that if the Federal Reserve implements rate cuts in response to economic indicators like the March CPI and FOMC minutes, there could be a market correction in the second quarter. Analysts warn that a larger correction may be on the horizon, which could trouble altcoins.
Cowen explains that if altcoins (represented by the alt/Bitcoin pairs) start losing value against Bitcoin, it may indicate an increase in recessionary pressures. This means that altcoins may lose value compared to Bitcoin. He emphasizes the importance of monitoring the TOTAL3 versus Bitcoin pair, which shows the market capitalization of all digital assets excluding Bitcoin, Ethereum, and stablecoins, to gauge the strength of the altcoin market.
Cowen also highlights the significance of the upcoming Bitcoin halving, which will reduce the block reward and decrease the yearly inflation rate. Despite the reduction in emission rate, he believes that high miner revenue, driven by Bitcoin’s price appreciation, will ensure profitability for miners and maintain the network’s security.
Furthermore, Cowen discusses the potential impact of the timing of rate cuts on Bitcoin dominance (BTC.D), which measures Bitcoin’s share of the overall crypto market. He suggests that a delay in rate cuts until July could result in a continued increase in Bitcoin dominance, signaling a bearish trend for altcoins.
In a bull market, prices generally rise, mainly driven by Bitcoin. Corrections do occur, but they are typically not severe, usually around 20% or less. Currently, Bitcoin’s correction stands at around 17.5%, indicating that it still has room for growth. If Bitcoin’s value increases, so do altcoins. Selling now could be a costly mistake if the bull market continues its upward trend.
In conclusion, it is crucial to carefully consider whether to hold or sell assets in the bull market.