“They Will Be Higher Than Today” – Blackrock Issues Bullish Crypto Prediction As Bitcoin, Ethereum, BNB, XRP, Terra’s Luna, Solana, Cardano, Dogecoin Price Goes Mixed


After a brief recovery from the bloodbath of the past two weeks, the crypto market is turning mixed.

This week the price of bitcoin fell 2.9% to just over $20,100 and the price of Ethereum
is down 4.5%. On the bullish side, binance is up 1.5%, cardano 3.5%, XRP
5%. Meanwhile, solana, who had been beaten to a pulp this year, rallied a whopping 28.7% last week.

While the crypto market has shown renewed vigor in recent days, relief comes too late for many crypto traders. Recent data shows that the bear market has liquidated hundreds of thousands of leveraged positions over the past few weeks.

In an interview with Yahoo Finance, Rick Rieder, CIO of Global Fixed Income at Blackrock, suggested that this deleveraging is a big contributor to the massive drop in the price of bitcoin and other cryptocurrencies.

“When you leave rates at such low levels for such a long period of time…when you hold a policy that’s too easy, leverage builds in the system and reduces” how do I capture the return quickly “- and you see a lot of the leverage that’s been built around crypto peeling off pretty quickly,” he said.

[Ed note: Investing in crypto is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]

Zoom out

Leveraged trading is a practice that allows traders to play the market with borrowed money in order to increase returns. The problem arises when the value of leveraged securities falls below a certain level, called the maintenance margin.

When this happens, traders are subject to what is called a margin call. This forces the trader to add more funds and cover potential losses. If the call is not promptly satisfied, the broker takes the liberty of liquidating the leveraged positions.

This leaves the trader holding only the debt he has incurred on his leveraged positions.

On a larger scale, this deleveraging is often the cause of a sharp and sharp drop in asset prices. Liquidations make the drop in prices ripple through itself. More and more margin calls come in and more and more assets are sold, driving the price down.

This is what likely salted the crypto wound in the recent rout.

In a recent tweet, crypto broker Cumberland said it saw a record volume of liquidations on June 13. “The flow ratio suggests that much of the flow was liquidations, with a 2:1 ratio between sellers and buyers,” Cumberland tweeted. In fact, data from Coinglass shows that June 13 saw over $600 million in liquidations, the biggest daily wipeout since March.

This came as no surprise to Rieder, who sees deleveraging as a natural mechanism for cleaning up the market after long periods of easy money and greed. He thinks we saw a similar meltdown during the bursting of the dotcom bubble:

“It’s not much different from the internet bubble… if you go back to 99 and 2000, was the internet a bad idea? No, it wasn’t a bad idea. But you’ve created so much hype around that and you just have to defuse that dynamic, and I think we’re seeing that today.

Look forward

Like many asset managers, Rieder believes this deleveraging will prove positive. Although it can be devastating for overextended traders, ultimately it will clear the market of questionable assets and open a new chapter for sustainable innovation.

“I still think bitcoin and crypto are sustainable assets. It’s a sustainable business, but there was so much excess built around it. I think there is a healthy recalibration going on. It’s a question of how much this recalibration is going to go,” Rieder said in the interview.

So, Rick, should we buy the dip?

“My feeling is like a lot of assets, if you look two or three years from now they will be higher than today.”

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