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By Lee Min-hyung
The price of Bitcoin will enter a period of a major upturn near the end of this year when the U.S. Fed is expected to be in the final stage of its monetary tightening, experts said Monday.
The outlook came after the inversion between the U.S'. 2-year treasury yield and 10-year treasury yield recently deepened to the highest level since 2000 amid the Fed's possible giant rate hike of 75 basis points in the upcoming rate-setting meeting next week. The yield-curve inversion is a major indicator of a recession.
A lead researcher at Bithumb, one of Korea's major crypto exchanges, said the cycle of rate hikes usually comes to an end about half a year after the curve inversion.
"The Bitcoin price will bottom out in the latter half of this year, and show signs of stabilization as the year-end approaches," Lee Mi-sun, the research center chief at Bithumb, said. This is because the Fed is widely expected to shift its monetary stance next year after ending the ongoing hawkish steps possibly around the end of this year, according to her.
Bitcoin's price has been trapped in a boxed range of $20,000 for the past month. The world's largest cryptocurrency by market capitalization soared to a historic high of more than $67,000 in November of last year on massive global monetary liquidity and then-booming crypto sentiment here and abroad, according to data from CoinMarketCap.
But Bitcoin has since extended losses amid growing fears of global monetary tightening. It fell below this year's new low of less than $20,000 early this month, which heightened fears in the overall crypto industry.
The abrupt collapse of the once-promising Terra-Luna ecosystem in May also came as a shock to the global crypto industry, adding more concern to the already-freezing market sentiment. The controversy is centered on the de-pegging of Terra's algorithmic stablecoin, UST. This situation ended up driving down the valuation of its sister token, Luna, to near-zero.
Ethereum, the second-largest cryptocurrency in the world by market capitalization, also tumbled after hitting a high of more than $4,600 in November. But Ethereum also ended up falling below the symbolic $1,000-range in June. Ethererum traded at around $1,300 on Monday, showing no signs of any major rebound.
The Bithumb research center expected the Fed to take a dovish turn as early as the first quarter of 2023.
"As the year-end comes closer, expectations will grow that the Fed will cut its base rate by 25 basis points in the first quarter of next year, considering shrinking consumption, slowing employment recovery momentum, the resurgence of the COVID-19 pandemic and Europe's recession," Lee said. "This means that Bitcoin will level off in the second half of 2022."
Peter Chung, the head of research at the other crypto exchange, Korbit, also concurred, saying that the current crypto winter will end before the end of this year.
"The point lies in when the Fed's monetary policy stance will change, as the authority's monetary tightening has been the key reason behind the current market slump," he said.
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