Following the recent speech by US Federal Reserve Chairman Jerome Powell, there was a price firework in the stock market, which also benefited Bitcoin. As a result, the BTC price has surged above USD 17,000.
At the time of writing, Bitcoin was trading at USD 16,982. However, the joy could not last long. The price is currently just floating along at the level reached. In the meantime, there are even signs of a slightly declining trend.
In the 1-hour chart, investors should keep an eye on four levels. A drop below $16,727 could mean an erosion of recent Powell gains. On the other hand, a rise above the $17,250 level would clear the way into the $17,800-$18,000 area.
Did the market misinterpret Powell?
The reaction of the Bitcoin market actually makes sense too. Since the last meeting, Fed officials have repeatedly defended the restrictive monetary policy and demanded its continuation.
That Powell now said that “the time to moderate the pace of rate hikes could come as early as the December meeting” was a surprise. Still, the market heard the aggressive comments.
Powell also said that the battle against inflation is far from over. Therefore, he said, the Fed must keep its policy at a restrictive level “for some time”.
Powell was also tired of emphasizing that the Fed still has a long way to go to bring inflation down and that they will probably need interest rates “slightly higher” than expected in the September projections.
Gold beetle Peter Schiff noticed:
Investors no longer buy what Powell sells. Today he was as aggressive as ever, but the dollar plummeted and gold and equities rose. Powell’s decision to fight #inflation depends on a soft landing. Not only will the economy crash, it will be another financial crisis.
Bitcoin faces headwinds in December
Whether there will be a Christmas rally in December is likely to depend on several factors that will confront Bitcoin with serious headwinds.
First and foremost, the December 14 meeting of the Fed and the release of the new CPI data a day earlier will likely be the key to determining whether there will be a green or red Christmas.
In addition, Bitcoin investors should keep an eye out FTX infection securities, especially Genesis Trading and DCG. If DCG indeed only one liquidity issue and can solve it, it would be a great relief for the crypto market.
Recession fears are also on the rise, but could take a back seat for now if inflation continues to fall and the Fed announces a 50 basis point rate hike. Potentially, this would be solid fuel for a strong year-end rally.
Of miners capitulation currently looming, Bitcoin could be entering the closing stages of its bear market. The historical average maturity is 14 months. We are currently in the 13th month.
A Glimpse After December – Bitcoin’s First Recession?
Not only Peter Schiff, but also other analysts are still warning of an impending recession, although Powell still called a soft landing “very plausible” during his last speech.
The fact that the full impact of the Fed’s policy will not become apparent until 2023 is also supported by the fact that Q4 earnings results, expected at the end of January, are always the strongest of the year.
A recession may therefore not become visible until April 2023, when the results for the first quarter of 2023 are announced.
A CryptoQuant verified analyst noted that the 2YR-10YR yield curve has the steepest inversion since the 2000s (dot com bubble). In the past 2 cycles, second inversions caused about a 50% correction in the S&P 500.
“The theoretical bottom of a similar correction would be the Covid low for SPX – 34% down from here,” said and continued:
If this happens, it would be Bitcoin’s first real recession. Its survival would forever solidify BTC as an investable macro asset. […] it also means that BTC prices can stay low for longer than the typical 3-month cycle bottoms.