Key Highlights
- Despite a slight decline on Monday, crypto assets and Bitcoin remain close to recent highs, with Ethereum circling around $1,790 and gaining 50% this year.
- The OPEC+ decision to reduce daily oil production is putting pressure on cryptocurrencies at a time when oil prices are skyrocketing, posing a danger of inciting inflationary pressures and leading the Fed to take more aggressive action, which could be detrimental to Bitcoin.
- Investment flows into cryptocurrencies are at their highest point since mid-2022, marking a significant shift after a stretch of unsettlingly consistent price behavior in the second part of last year.
Crypto assets and Bitcoin remained close to recent highs despite Monday’s slight decline, however, a dark cloud seems to be looming around the bullish digital market space.
The general mood of the cryptocurrency market in Q1 changed from bearish to “positive.” Ethereum, the second-largest cryptocurrency in the world, is likewise circling about $1,790 with a daily volume of close to $8.5 billion.
The previous week, ETH spiked to $1,858 levels, which was the greatest peak since August 2022.
This year, Ethereum has increased by approximately 50% and gained more than 10% in March alone but the story seems to be changing via the Oil cartel’s latest moves.
Brent crude increased by more than 6% to $85 on Monday. This was in reaction to Opec’s weekend announcement that Saudi Arabia would cut its production by 5% and that other Opec+ cartel members would follow suit with their reductions.
The action had many strategic ramifications. Many experts contend that rather than being a tactical action to support a falling oil price, it represents a strategic shift by the Saudis and their allies.
Saudi Arabia intends to cut oil output by a total of 1.15 million barrels per day, along with several other significant oil producers, including Russia, the United Arab Emirates (UAE), Iraq, Kuwait, Oman, and Algeria. Saudi Arabia and Russia announced plans to cut oil output by 500,000 barrels per day (bpd), while the UAE and Kuwait will each cut production by 144,000 and 128,000 barrels per day, respectively.
The OPEC+ action is putting pressure on cryptocurrencies at a time when oil prices are skyrocketing, which poses a danger of inciting inflationary pressures and may lead the Fed to take more aggressive action. This would be detrimental to Bitcoin.
According to Bloomberg Intelligence strategist Mike McGlone, Bitcoin may be the best investment for macro investors, but he cautions that its advances in the near future may be threatened by an impending recession.
In a new live stream with Scott Melker, McGlone claims that the Federal Reserve’s decision to raise interest rates to combat inflation, along with OPEC’s decision on Sunday to reduce daily oil production, increase the likelihood of a recession.
Our Bloomberg economist Anna Wong stated, “Yeah, their base case is for that recession to start in Q3 during our morning call this morning. We’re now starting to advance it a little. OPEC is assisting in this. That is being aided by Fed tightening. Therefore, all possessions must decrease.
” This also includes Bitcoin. It is the race’s swiftest horse. I, therefore, consider myself to be generally bullish. But if I anticipate a further decrease of a third in the stock market from here, I must be prepared for such weakness, and that remains my basic scenario.
The problem is currently being somewhat accelerated by crude oil. OPEC is merely acknowledging that they are beginning to see the global demand issue, and they are responding as a sensible cartel would within the confines of economic reason.”
The 70% increase in Bitcoin this year happened in two phases. First, there was the year-opening flight to junk when hopes for a soft landing and lower interest rates sparked a rise in all kinds of high-duration junk.
The second was the aftermath of the bankruptcy of Silicon Valley Bank. Bitcoin’s price increased when bond yields dropped.
According to CoinShares, investment flows into cryptocurrencies are at their highest point since mid-2022.
This is a significant shift after a stretch of unsettlingly consistent price behavior in the second part of last year.
