Not geopolitics, but monetary policy: the true reason for the collapse of Bitcoin, gold, and SpaceX stocks
The main driver for all risk assets has sharply shifted. Geopolitics in the Middle East has been replaced by a hawkish turn in the Fed's rhetoric. After the new Federal Reserve Chairman Kevin Warsh took a hawkish stance, the financial world reacted instantly. The market didn't just erase the chances of a rate cut from quotes; it began actively pricing in a rate hike.
An analyst known by the pseudonym Coin22 has thoroughly analyzed the current situation. According to his observations, the US dollar has already updated its yearly high. At the same time, the S&P 500 index is steadily heading towards its fourth consecutive red weekly candle. Gold and silver are notably correcting, and SpaceX shares have plunged 30% from their peaks. Coin22 is convinced: money is now being hidden in government bonds.
Why Capital is Fleeing to Bonds
The analyst's logic is based on a rapid reassessment of market risks. When the cost of money rises, future cash flows of companies are discounted at a higher rate. This primarily hits growth stock valuations, especially the technology sector. As is known, this segment was heavily inflated by cheap credit. Capital senses such changes about a quarter in advance.
The analyst interprets the drop in oil prices quite uniquely. For him, it is not a reason for joy, but a clear symptom of an economic slowdown. In his view, for the Fed, lower commodity prices no longer offset the stubborn rise in service prices. Gasoline in the country is getting cheaper, but services, insurance, and rental housing continue to rise rapidly. Consequently, core inflation has become firmly entrenched, which is why the regulator is talking about hikes to suppress demand.
Factors of Asset Attractiveness
| Asset | Current Status | Investment Attractiveness |
| Bonds | Maximum yield in 10 years | High (guaranteed 2-3% above inflation) |
| Stocks (S&P 500) | Overheating and correction threat | Low (risk premium compressed to a minimum) |
| Gold | Lack of cash flow | Low (high opportunity cost) |
The main argument in favor of bonds is the positive real rate. According to Coin22, the nominal yield on short and medium-term securities is at its highest in over a decade. Consequently, the real yield becomes anomalously attractive for large players. He calls it a common fatal mistake to argue that it's better to make money in stocks. Why take on the risk of a 20% correction in the S&P 500 if a risk-free instrument offers a guaranteed profit?
Gold clearly loses out in this scheme for the same reason. The asset does not generate a stable cash flow. Therefore, when real yields rise, the opportunity cost of holding it becomes prohibitively high.
Additionally, the analyst points to the traditional end-of-quarter effect. Large funds need to lock in profits in overheated assets and show clients a stable result. The safest way to do this is to shift into fixed-income instruments. He links the rotation scenario to the actions of Goldman and JP Morgan. Incidentally, JP Morgan itself needs to rebalance its portfolio by $165 billion by June 30. That is precisely why stocks, gold, and crypto are falling simultaneously right now. The first thing to do in such a situation is to actively hedge with shorts.
Scenarios for Gold and Bitcoin
Over the next few months, the analyst expects the Fed to maintain a pause. The first rate hike, if it happens at all, will come no earlier than September. This means yields on short-term securities will remain high, and capital will continue to flow into bonds. Metals, according to his forecast, will trade in a range with downside risk. If the market believes in several rate hikes, gold could be pushed down to $3000. However, a crash is not expected due to constant purchases by global central banks.
For gold, Coin22 is not yet opening a short from current levels. Instead, he is waiting for a local bounce to gradually build a position:
- first entry into the market around $4250 (25% of position size);
- second zone for adding around $4400 (another 35% of position);
- final addition near the $4500 level with signs of buyer weakness.
The level for a complete cancellation of the entire bearish scenario will be a price consolidation above $4600. The investor plans to take profits in stages.
For bitcoin, the calculation relies entirely on the classic cyclical model. The key global cycle reversal typically occurs approximately 826 days after the halving. After that, it takes another 70 to 110 days to reach the main bottom. In relation to the current cycle, the 826-day zone falls at the end of July. Thus, the potential main bottom is expected in October–November in the range of approximately $50,000-55,000.
However, the analyst does not expect the price to fall in one sharp move. A "bull trap" is quite likely in July with a bounce to the $70,000 area. His current tactical goal is to catch a long position in the $58,000-58,500 zone. This would allow profiting from a move to $67,000-70,000, after which a new wave of decline would begin towards autumn.
My comment as an analyst: The market is experiencing a classic rotation of capital from risk assets into safe-haven instruments against the backdrop of the Fed's hawkish turn. The main blow falls on overvalued sectors, including cryptocurrencies and high-tech stocks. Investors should prepare for increased volatility in the coming months, especially ahead of a possible rate hike in September.