Warren Buffett’s Divestment Signals Caution for High-Risk Assets like Bitcoin
Warren Buffett’s recent $13.3 billion divestment from stocks may signal caution for high-risk assets like Bitcoin. The Berkshire Hathaway CEO’s move to increase the company’s cash reserves by $2 billion in Q1 2023 suggests a potential downturn in risky assets.
With Bitcoin’s 70% year-to-date increase and its correlation with equities, investors should consider preparing for a possible stock market decline. The market sees Berkshire Hathaway’s portfolio as a key indicator of the US economy, and its recent divestment and investment in cash and Treasurys may reflect a waning optimism.
As Bitcoin’s 100-week correlation with the Nasdaq hits a peak of 0.42%, Bloomberg Intelligence’s Mike McGlone suggests Bitcoin could predict a potential stock market downturn. The Federal Reserve’s tightening monetary policy could also lead to a negative outcome for all parties involved.
Bitcoin/Nasdaq correlation index. Source: Bloomberg Intelligence
Possible Interest Rate Reductions in the US: Implications for Investors like Buffett
In the immediate timeframe, limited anticipations are held regarding the United States. The report on the Consumer Price Index, which was released on May 10, highlighted a reduction in inflation during April. A Bloomberg survey of economists predicts that the core Consumer Price Index will stay around 5%, potentially leading to more interest rate hikes. However, if inflation drops significantly, the Federal Reserve may temporarily pause or decrease interest rates, especially in exceptional circumstances. Data from Fed funds futures suggests that at least five rate cuts could happen between May 2023 and January 2024. To optimize readability and SEO, it’s best to use shorter, simpler words, limit sentence length to 20 words or less, and avoid excessive use of passive voice. This development may undermine the risk-averse approach adopted by Buffett.
Fed funds rate projections. Source: Bloomberg
Could Bitcoin price sink to $25K again?
Bitcoin’s price has declined roughly 6% over the past week, trading for as low as $27,350 on May 9.
Notably, this has pulled BTC’s price below its 50-day moving average (50-day SMA; the red wave), near $27,911.
Bitcoin bears are now eyeing $26980 as the next downside target based on the level’s recent history.
BTC/USD Analysis: Support Levels and Potential Price Movements
In the world of cryptocurrency trading, BTC/USD faces potential ups and downs. If interest rates continue to rise, a significant drop below the support level of $26,980 could cause a further drop to the 200-day Simple Moving Average (SMA) at $24,933.
However, if BTC/USD rebounds from $26,980, it could increase the likelihood of retesting the resistance level of $30,000 and continuing the upward trend seen in recent months. Additionally, traders should be aware that a break above the $30,000 resistance level could signal a more significant bullish trend. We have other two important supports at 25993 / 25669.
