Go With The FED, Why Bitcoin Could Benefit From Interest Rate Hikes

Bitcoin may be close to ending the first week in red as the cryptocurrency market suffered another setback and is now at critical support. Following a rebound from lows of $42,000 and a loss of 7.3% in the last 24 hours, benchmark crypto traded at $43,000.

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BTC in a downtrend on the 4-hour chart Source: BTCUSD Tradingview

Bitcoin made a sharp turn to its present levels on December 3.rd. Some traders expected this to happen before bulls can take another swing at high levels. In the short term, BTC’s price is yet to stabilize and could dipped further into the high $30,000s and $40,000.

According to the U.S. Federal Reserve Jerome Powell, statements about CPI and possible tapering were made regarding the current macro-economic conditions. It could be the best way to stop inflation from rising in this country.

At a record 40-year high, inflation may continue to climb which would lead to an increase in interest rates as well as a decrease in liquidity. With a more hawkish FED, this possibility is quickly becoming a reality felt across the global markets as Gold, Bitcoin, and the S&P 500 moved to the downside.

Source: Santiment via Twitter

Although an increase in interest rates may put pressure on Bitcoin’s price, Senior Commodity Strategist at Bloomberg Intelligence Mike McGlone thinks the benchmark cryptocurrency could rise above the current environment. The expert said in a report:

the first born (cryptocurrency) is rapidly transitioning toward becoming the world’s digital reserve asset (…). The “don’t fight the Fed” mantra may already be pressuring the broad crypto market, with companionship from peaking commodities.

In the short term, the $30,000 level that worked as support for Bitcoin in 2021 could still prove solid in 2022, but McGlone believes it’s “unlikely” that BTC will revisit it.

Bitcoin to Outperform the Global Market in 2022

Since the beginning, the expects has held a bullish view on Bitcoin and Ethereum. This belief will be maintained for the upcoming months. A more risky economic environment may lead to greater downside pressure. However, the 100,000 price point remains unaffected.

This global decline in the markets would be the FED’s biggest ally to fight inflation. However, the benchmark crypto could experience a “win-win situation” as it benefits from less total liquidity as opposed to the stock market which seems “overextend above its 60-month moving average in over two decades”. McGlone also added:

Although stretched markets are becoming more common, commodities and Bitcoin seem to be the early leaders in reversion. It’s a question of bull-market duration, and we see the benchmark crypto coming out ahead.

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Source: Mike McGlone, Bloomberg Intelligence

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