Investing.com – According to Michael Howell of Cross Border Capital, which manages more than $1 billion in fixed-income assets, one key element is needed for a recovery in market prices: liquidity.
Howell said the value of cryptocurrencies has fallen recently because central banks around the world have drained liquidity from financial markets by raising interest rates.
Bitcoin, for example, has lost around 75% of its value since its all-time high of $67,130 in October 2021. The decline comes as $29 trillion in liquidity has been withdrawn from the financial system over the same period. , according to Howell.
“They’re completely connected. We’ve got maximum liquidity tightening right now, and central banks are actually thinking about squeezing even more. What you’re going to start to see is more traffic accidents as we go along. time”
Howell believes that cryptocurrencies are “extremely cash sensitive” and could be one of the first indicators of changing conditions in financial markets.
“If the bitcoin price starts to bottom out here and even manages to rally a bit, that could well be a good indication that liquidity conditions are improving”
He added that as soon as central banks move away from monetary tightening, assets – including bitcoin – “will see a very strong rise. It’s very clear if you look at the historical evidence.”