The analyst, who correctly predicted Bitcoin’s (BTC) bottom in November 2022 and its recent pre-halving peak, said he would be bearish against risky assets including technology stocks and cryptocurrencies.

“Our growing concern is that risky assets (stocks and cryptos) are on the verge of a significant price correction. The key driver for this is unexpected and persistent inflation. While the bond market is currently predicting less than three rate cuts and 10,” Markus Thielen, founder of 10X Research, said in a note to clients on Tuesday. “With the annual Treasury bill yield exceeding 4.50%, we may have reached a critical turning point for risky assets.” said.

Thielen also wrote in his note, “We sold all of our tech stocks last night because the Nasdaq was trading so poorly and reacted to high bond yields. We only have a few high-conviction cryptocurrencies. Overall, we are bearish on risky assets (stocks + crypto).” He included his statements.

According to CMEGroup data, investors recently reduced the likelihood of the Fed lowering interest rates by 25 basis points this year to less than three, from six estimates at the beginning of the year.

Hawkish pricing spurred by the stubbornness of U.S. inflation, a resilient labor market and a strengthening economy has pushed the yield on the 10-year Treasury note up 40% this month to 4.61%, the highest level since November 2023. The sharp rise in these rates, called risk-free interest, has reduced the investment attractiveness of high-risk/high-return assets such as technology stocks and cryptocurrencies.

“The majority of the 2023/2024 Bitcoin rally was driven by the expectation of interest rate cuts, and that narrative is now being seriously challenged,” Thielen said, noting that investments going into spot exchange-traded funds (ETFs) have also dried up.

The U.S. Securities and Exchange Commission (SEC) approved nearly a dozen spot BTC exchange-traded funds (ETFs) in January, allowing investors to trade the cryptocurrency without owning or storing it.

Since then, approximately $12 billion has been transferred to these investment vehicles. However, most of the funds transferred last quarter, pushing the cryptocurrency higher, while demand has decreased this month.

Bitcoin ETF entries. (10x Research) (10x Research)

The 5-day average of net inflows dropped to zero.

“After the initial innovation excitement, ETF flow tends to dry up unless prices continue to rise – which we haven’t seen since early March. Those investors who are down 2% to 17% may fall by the wayside,” Thielen said. he explained.

Some observers expect the correction to accelerate once the excitement surrounding the Bitcoin network’s four-year mining reward halving, expected to occur in April, subsides. Built into the code, this halving will halve the supply growth rate by reducing the mining reward per block from 6.25 BTC to 3,125 BTC.

Bitcoin is currently trading at $62,600, indicating a year-to-date gain of 42%, according to CoinDesk data. The CoinDesk 20 Index, a broader market index, was at 2119 points at press time and is up 17% since the beginning of the year.