Bitcoin recently saw some positive price action but failed to continue and could remain in range in December. The cryptocurrency rose from a new annual low of $15,500, with market participants expecting further gains, but the market has stalled.
At the time of writing, Bitcoin is moving between $16,900 and $17,100. The cryptocurrency still maintains last week’s gains, but today’s trading session tended to the downside.
No Christmas miracle for Bitcoin?
In a recent market update, trading desk QCP Capital marked the positive performance of Bitcoin and Ethereum in December. These digital assets have closely followed the trajectory of the stock market.
The company believes that stocks have gained strength thanks to a potential pivot from the US Federal Reserve (Fed). The financial institution hinted at moderating its monetary policy and winding down its rate hike program.
This potential change created “strong” bullish momentum for the stock market, allowing Bitcoin and Ethereum to gain 13% and 22% over the past two weeks. Despite FTX’s collapse in November and contagion fears, the value is almost back to October levels.
In this context, market participants were quick to announce the end of the bear market, but QCP Capital argues there are reasons to maintain a bearish bias. Robust economic data from the US, for example, could support the Fed to continue its tightening policy.
QCP Capital stated the following regarding the current price action in the legacy financial market and its impact on the crypto market:
While many say BTC and ETH are lagging equities and should be catching up, we rather see them as equities that have overrun fundamentals and will soon be whistled back.
So the stock market’s potential to push Bitcoin and Ethereum down is high. There are indications of potential downside pressure for equities, cryptocurrencies and asset risks.
Analyst Caleb Franzen pointed to the VIX index; an indicator used to measure volatility in legacy financial markets. This metric has provided a solid strategy for buyers of risky assets in 2022. The analyst said:
The CBOE Market Volatility Index #VIX fell below 20 last week, but launched higher today! As I’ve been sharing since August, the key strategy for 2022 has been:
• Buy risky assets when $VIX > 30
• Sell risky assets when $VIX < 20
Regardless of rising expectations, the crypto market could see more selling pressure in the coming weeks. This month’s Federal Open Market Committee (FOMC) will shed more light on the direction of the macroeconomic landscape and the landscape for risky assets, such as Bitcoin.