Bitcoin (BTC) could remain under pressure in the short term, potentially offering a buying opportunity for investors, according to Bitwise’s Andre Dragosch.
Andre Dragosch, Head of Research for Europe at Bitwise, who has been notably bullish on Bitcoin in recent months, has turned more cautious following last week’s 8% decline, warning of possible deeper corrections in the coming weeks.
The leading cryptocurrency by market capitalization dropped 8.8% last week, nearing the $95,000 mark—the largest weekly decline since August—according to data from TradingView and CoinDesk Indices. This pullback followed the Federal Reserve’s indication of fewer-than-expected interest rate cuts in 2024, while reiterating its stance against holding BTC or seeking changes in the laws surrounding it.
The Fed’s hawkish signals impacted broader financial markets, causing a 2% drop in the S&P 500, a 0.8% increase in the dollar index to its highest level since October 2022, and a 14-basis point rise in the 10-year Treasury yield, which broke through key technical levels.
Andre Dragosch highlighted the challenging macroeconomic landscape, noting, “The Fed is stuck in a difficult position as financial conditions continue to tighten despite three consecutive rate cuts since September. At the same time, real-time measures of inflation have accelerated, with indicators like Truflation pointing to rising U.S. price pressures.”
Dragosch, who correctly predicted Bitcoin’s significant rally in late July when prices were around $50,000, remains cautious but optimistic about long-term prospects. “While more downside is likely in the coming weeks, this could present an attractive entry point given Bitcoin’s ongoing supply deficit,” he explained.
Rising Treasury yields, which signal higher borrowing costs and more appealing fixed-income investments, typically lead to outflows from risk assets such as cryptocurrencies and equities. A stronger dollar also raises the cost of USD-denominated assets, reducing foreign investment appeal.
Inflation Parallels with the 1970s?
The debate over inflation echoes the 1970s, where a second inflation wave proved more severe than the first. Recent sticky Consumer Price Index (CPI) readings have heightened concerns at the Federal Reserve about a potential repeat scenario.
“The Fed seems wary of a ‘double hump’ inflation scenario reminiscent of the 1970s, which is why they are hesitant to cut rates aggressively,” Dragosch said. “An aggressive rate cut risks reigniting inflation, while too little action could harm economic growth.”
Despite these short-term headwinds, Dragosch remains optimistic about Bitcoin’s long-term outlook, emphasizing the asset’s fixed supply as a powerful driver for future price appreciation. Ultimately, he believes sustained financial tightening will compel the Fed to take action, which could further boost Bitcoin’s appeal as a scarce digital asset.
