10x Research Pivots Portfolio, Dumps Crypto Amid Inflationary Fears and Market Concerns

Markus Thielen of 10x Research has shifted his crypto strategy due to financial pressures and market instability. Citing a concerning outlook on risk assets driven by inflation, Thielen has divested from nearly all crypto and risk assets, including technology stocks. The decision was influenced by adverse economic indicators, such as the US bond market projecting fewer than three Federal Reserve rate cuts this year and 10-year Treasury Yields reaching a peak of 4.61% this month.

10x Research Pivots Investment Strategy, Exiting Crypto and Risk Assets Amid Economic Headwinds

Insightful Analysis by Markus Thielen Highlights Inflationary Pressures and Bearish Market Outlook

In a significant shift of strategy, influential market analyst Markus Thielen of 10x Research has announced the divestment of his firm's holdings in cryptocurrencies and other risk assets. The decision, disclosed in an investor note released earlier today, underscores the growing concerns surrounding inflationary pressures and the potential for an impending market correction.

Thielen's analysis highlights a disconcerting outlook for risk assets, including both technology stocks and cryptocurrencies, largely driven by the impact of persistent and unexpected inflation rates. Projections from Bank of America anticipate US CPI headline inflation reaching 4.8% by November 2024, driven by a 0.4% average monthly increase in CPI inflation over the past three months. Such a trajectory would result in an inflation rate more than double the Federal Reserve's 2% target.

Economic Indicators Signal Bearish Landscape for Risk Assets

This unfavorable economic outlook has prompted 10x Research's exit from risky assets. The US bond market currently anticipates fewer than three Federal Reserve rate cuts this year, a substantial adjustment from previous forecasts. According to the CME FedWatch tool, market participants predominantly anticipate the Fed maintaining interest rates until at least the mid-September FOMC meeting.

Furthermore, 10-year Treasury Yields have surged to a peak of 4.61% this month, the highest level since November 2023. This rise in bond yields further complicates the investment landscape for risk assets.

"Our growing concern is that risk assets are teetering on the edge of a significant price correction," Thielen stated in the note. "We sold all our tech stocks last night as the Nasdaq is trading very poorly and reacting to the higher bond yield. We only hold a few high-conviction crypto coins. Overall, we are bearish on risk assets."

Disappointing Performance of Bitcoin ETFs Reinforces Bearish Sentiment

The bearish stance adopted by 10x Research is further supported by the lackluster performance of US-listed spot Bitcoin ETFs. Despite the SEC's approval of nearly a dozen such ETFs in January, initially fueling a surge in Bitcoin prices, the influx of capital has markedly slowed. This month, the five-day average net inflows into these ETFs dropped to zero, a stark contrast to the nearly $12 billion that flowed in earlier in the year.

Bitcoin Halving May Offer Little Respite

Thielen also contemplates the upcoming Bitcoin network's quadrennial halving, scheduled for April 20. This event, which reduces the reward for mining a block of Bitcoin by 50%, has historically triggered bullish sentiment and price increases due to the perceived scarcity of Bitcoin. However, Thielen believes that the current market conditions may mitigate any potential rallies.

"It is essential to understand that trading is a continuous game with high-conviction opportunities. The key is to keep analyzing the markets and uncovering those opportunities when the odds are in your favor. There are times when we advocate for a total risk-on approach and when the priority is safeguarding your capital, enabling you to seize opportunities at lower levels," Thielen stated.

Agile Trading Strategy Defended Amid Criticism

In a notable exchange with Matthew Graham of Ryze Labs, Thielen defended 10x Research's trading strategy, which has faced criticism for what was described as erratic decision-making. Graham pointed to recent fluctuations in 10x Research's stance on Bitcoin, including a research note in early April that predicted a potential rally to $80,000, followed by a more cautious view and the recent sell-off.

Thielen responded, "Actually, no. We have been cautious since March 8, and when the triangle breakout failed, we worked with the $68,300 stop loss. This is simply risk-reward trading." This defense highlights the volatile nature of crypto trading and the necessity for agile strategies in response to rapidly changing market conditions.

Re-Entry Promised at Lower Levels

Thielen concluded by expressing confidence in a strong re-entry into the market under more favorable conditions: "Will buy back with both hands at 52,000 – promise."

At the time of writing, BTC traded at $63,045.