Investing.com -- Bitcoin prices took a nosedive, dropping 30% over the past week to hit a multi-month low of $49,120 on Monday, down from a high of $70,000 on July 29. At the same time, mining stocks fell by 18%, while the Nasdaq only saw a 3.1% dip.
H.C. Wainwright attributes the sell-off in the crypto and equity markets to three primary factors: the fears of a hard landing for the U.S. economy after weak data, the unwinding of a popular global carry trade following the Bank of Japan's rate hike, and escalating geopolitical tensions in the Middle East.
"We saw this price correction coming, and the pain might not yet be over," wrote H.C. Wainwright. The firm expected back in mid-April, when Bitcoin was trading around $66,000, that the primary coin could retrace to the low-to-mid $50,000 range in the short term due to macro-related headwinds and geopolitical risks.
Despite the medium- and longer-term bullish outlook, H.C. Wainwright remains cautious in the short term. The firm is concerned about Bitcoin’s rising correlation to equities in times of stress, which reaffirms its status as a risk asset.
"Any further weakening of economic data or escalating tensions in the Middle East could result in additional downward pressure for Bitcoin prices," H.C. Wainwright warned. They anticipate the Federal Reserve could respond with a series of rate cuts and looser monetary policy, paving the way for Bitcoin to resume its upward trajectory in the next leg of this bull cycle.
In the meantime, mining economics have compressed to all-time lows, with hash prices trending as low as $0.036 per terahash per day on Monday, a roughly 65% decrease from pre-halving levels.
At these levels, H.C. Wainwright expects large public miners with better access to capital to continue gaining market share over smaller private peers. They highlighted CleanSpark as their top pick for 2024 due to its good scale, strong balance sheet, and low production costs.
In other news, Morgan Stanley will begin allowing its financial advisors to offer Bitcoin ETFs to certain clients this week. Starting August 7, the firm will allow its 15,000 financial advisors to solicit the purchase of shares in two U.S. spot Bitcoin ETFs—BlackRock's iShares Bitcoin Trust (NASDAQ:IBIT) and Fidelity’s Wise Origin Bitcoin Fund (NYSE:FBTC) - to eligible clients.
"We view the announcement as a major development that should accelerate approvals at other leading banks," H.C. Wainwright commented, expecting this to drive a re-acceleration of inflows into the Bitcoin ETFs.