Bitcoin (BTC) may face further downward pressure in the coming weeks, presenting a potential “buy the dip” opportunity for long-term investors, according to Andre Dragosch, Director and Head of Research Europe at Bitwise Asset Management.
Market Downturn
Bitcoin, the world’s largest cryptocurrency by market value, saw an 8.8% decline last week, falling to approximately $95,000. This marks its steepest percentage drop since August, driven by hawkish signals from the Federal Reserve.
The Fed’s announcement included fewer anticipated rate cuts for 2025 and reaffirmed its prohibition on holding BTC, which contributed to a broad risk-off sentiment across markets. Traditional financial assets were also impacted, with the S&P 500 losing 2% and the dollar index climbing 0.8% to its highest level since October 2022.
Treasury yields rose sharply, with the 10-year note gaining 14 basis points, signaling higher borrowing costs and intensifying the appeal of fixed-income investments over riskier assets like cryptocurrencies.
Expert Insights
Dragosch, known for his accurate prediction of BTC’s summer rally to over $100,000, has turned cautious, citing tightening financial conditions and a resurgence in inflationary pressures.
“The Federal Reserve is in a tough position as financial conditions have tightened despite three consecutive rate cuts since September. Meanwhile, real-time indicators like Truflation’s U.S. inflation tracker suggest that consumer prices have re-accelerated,” Dragosch told CoinDesk.
He added, “While more short-term pain seems likely, this could represent an intriguing buying opportunity, given Bitcoin’s supply scarcity and the ongoing structural tailwinds.”
Inflation Fears and the 1970s Parallel
Dragosch likened current inflationary pressures to the 1970s, a period marked by two intense inflationary waves. Recent sticky inflation readings may be prompting the Fed’s cautious approach to rate cuts, fearing a “double-hump” scenario.
“The Fed is wary of a 1970s-style twin peak in inflation, which could occur if they cut rates aggressively. On the other hand, maintaining a conservative stance risks economic stagnation,” Dragosch explained.
Long-Term Outlook
Despite near-term headwinds, Dragosch remains optimistic about Bitcoin’s long-term prospects. BTC’s fixed supply cap and its growing adoption as a store of value could position it as a strong hedge against monetary instability.
“Eventually, the financial tightening caused by rising yields and a stronger dollar will force the Fed to act, creating favorable conditions for Bitcoin to capitalize on its unique scarcity,” Dragosch said.
As of now, Bitcoin’s market trajectory remains uncertain, but its fundamentals continue to provide a compelling narrative for patient investors.
