There will be no appetite for risk as long as there are concerns about the global economy, and high funding rates remain. We have seen how in 2020, worries about the negative effect of coronavirus on global GDP did not prevent investors from actively buying up high-risk assets, as global central banks began flooding the markets with cheap liquidity, and the real yield of treasuries went into negative territory.

At the moment, we are dealing with a high probability of recession in the US and the EU against the background of an increase in the cost of dollar funding and, as a result, bond yields. The economic situation in the eurozone is much sadder than in the US, as a result of which the ECB cannot afford to raise rates in the same aggressive manner as the Fed. That is why investors are now choosing dollar assets, which is reflected in the dynamics of the EUR/USD exchange rate.

At the same time, the risks of a recession in the United States have not gone away, the consensus is simply that it may manifest itself in 6-12 months, and not immediately after the start of tightening monetary policy. In addition, there is no guarantee that the pace of US inflation will not accelerate in the coming months, and the period of high rates will drag on.

Add to this concerns about possible defaults of borrowers who used margin collateral for speculation.

Mainly we are talking about hedge funds. The cost of CDS has skyrocketed in recent weeks and is now at the level of the beginning of 2020, which makes sense, because the Fed’s rate hike in the past has repeatedly turned into massive defaults, for example, as in 2008.

As we can see, there are no reasons for the resumption of active speculation in the market right now. By opening positions now, major players take on the risk not only of further falling coins, but also of possible problems with effectively closing a position, because in the risk-off environment, the number of potential counterparties has greatly decreased.

The current setup in the market implies a further drop in cryptocurrencies. In particular, BTC may well fall in price to $ 10 thousand before the start of the recovery process.