Economic Policies and Their Impact on Bitcoin

Recent economic policies, particularly those from the U.S. administration, are creating significant headwinds for risk-on assets like Bitcoin.

The recent actions of the U.S. administration, particularly in terms of economic policies, are setting the stage for significant headwinds for risk-on assets like Bitcoin in the coming six to nine months.

As the administration focuses on reducing the U.S. deficit through government spending cuts, tariffs, and immigration policies, these measures, while stabilizing the economy, could also lead to a slow and painful market downturn.

However, despite the gloomy outlook, there are also glimmers of hope on the horizon, such as the potential for Federal Reserve rate cuts to offer some reprieve for Bitcoin.

Bitcoin Price Analysis: Decoding the Technicals

The cryptocurrency market has been grappling with macroeconomic uncertainties, including trade tariffs and monetary policies, putting immense pressure on Bitcoin's price.

As the Network Value to Transactions (NVT) Golden Cross indicator reached new highs, the analysis suggests that Bitcoin might be overvalued, especially in the context of the low transaction volumes observed.

"The NVT Golden Cross indicator has hit a new high, which might be signaling that Bitcoin is overvalued, especially given the low transaction volumes," the analysis stated.

According to the latest data from Glassnode, the NVT indicator, which compares Bitcoin's network value to the total transaction volume on the blockchain, has reached a new all-time high of 600.

This extreme valuation is typically seen during the later stages of bull markets, as investors pour into the market, bidding up prices rapidly.

According to QChain's analysis, the NVT indicator is now in "uncharted territory."

"This extreme valuation is usually seen in the final stages of a bull market, when there is a frenzy of buying activity and transaction volumes are soaring to new highs. However, we are currently observing very low transaction volumes, which might indicate that the bull market is maturing and we could be approaching a turning point."

The analysis further explained that if the NVT indicator remains high while transaction volumes remain low, it could be a sign that the market is becoming overvalued and vulnerable to a correction.

"For the NVT indicator to continue to be useful and maintain its accuracy in the long term, we need to see a return to normal transaction volumes, which would allow the indicator to continue to effectively track the market cycles."

The analysis concluded by stating that if transaction volumes do not pick up, we might see further declines in the Bitcoin price.

"The fate of Bitcoin in the coming months will depend on how the macroeconomic trends play out and how quickly we see a recovery in transaction volumes."

The analysis also noted that the market value to realized value (MVRV) ratio, which compares Bitcoin's market cap to the total realized value of all coins in circulation, is now cooling down from very hot levels, which might also indicate a market correction.

Furthermore, the Fear & Greed Index, which tracks market sentiment, is currently showing extreme fear, which is also typical of market bottoms.

However, despite the bleak outlook, there are also glimmers of hope on the horizon. According to Mohsin, the macroeconomic trends might start to shift in the next six to nine months, which could offer some reprieve for Bitcoin investors.

"The administration is planning to cut government spending, raise tariffs, and restrict immigration in an effort to reduce the U.S. trade deficit, which could have a knock-on effect on the market. These measures are expected to stabilize the economy but could also lead to a slow and painful market downturn."

However, Mohsin believes that the worst of the downturn might be over by the end of the year, especially if the Federal Reserve begins cutting interest rates as expected.

"With the U.S. economy slowly recovering from the pandemic, the administration has set its sights on reducing the federal deficit through a multi-pronged approach that includes government spending cuts, tariffs, and immigration policies. These policies are likely to have a significant impact on the market in the coming six to nine months."

According to Mohsin, the administration plans to cut government spending by $1 trillion over the next decade through a combination of reducing discretionary spending and entitlement programs. These spending cuts are expected to weigh on the market, especially in the short term, as they could lead to slower economic growth.

The administration is also planning to increase tariffs on Chinese goods in an effort to reduce the U.S. trade deficit. Mohsin explained that while the tariffs are intended to protect U.S. jobs and industries, they could also lead to higher prices for consumers and businesses, ultimately slowing down the economy.

Moreover, the administration is planning to reduce legal immigration to the U.S. in an effort to boost wages for low-skilled workers. However, Mohsin noted that this policy could