“Taper” and “volatility” seem to be the words of the month as Bitcoin gets further away from its $69,000 November all-time high. BTC saw a short-term pullback, dropping below $48,000 on the 13th of December. Some see the downsides more than others, while some prefer to bid on BTCUSD gains.
Investors have derisked as all eyes are on and the current FOMC meeting and the Fed tapering of asset purchases, fearing Jerome Powell will be –too– hawkish. There are many speculations running around and some experts have suggested this Wednesday could turn into a “buy the rumors, sell the news” event, thus Bitcoin could see buyers cashing in.
NewsBTC previously reported that the central banks will reduce their net asset purchases month-to-month by $10 Billion for Treasury securities, and $5 Billion for agency mortgages-backed securities.
This scenario is likely to get worse for crypto and traditional markets, should the Fed make a fast taper. It will double the rate at $30 billion per month and raise interest rates earlier.
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The Bitcoin Talks of Traders
William Clemente, Analyst claimed on Twitter that as the FOMC is “a known event”, then “anyone who is bearish BTC or wanted to risk-off lead up to FOMC has been and will have already done so by then.” Clemente wonders “how many sellers will be left + how much capital is on the sidelines.”
In a “sell the news” you have the opposite effect. Insiders are the first to run the event, and they then work their way down to the bottom of informational totem poll. The event is over before anyone can buy.
For this reason, the analyst thinks that FOMC has a good chance to become a “sell the rumor, buy the news” event tomorrow.
Combine that with the illiquid supply returning to yearly highs, and you will see some big Bitfinex bids. Waiting for $53K before you can start bidding. We are happy to pay confirmation but we will miss some moves.
Clemente basically says that there’s so much uncertainty surrounding the taper, investors might be able to see what it looks like once they have a better idea. The tapering’s impact on markets will play a significant role in this. If the expected amount is met, the bull might resume, however, huge drops could occur if the Fed increases its tightening beyond expectations.
Another Twitter user breaks it down: “It’s suggesting the market is overpricing in fear and selling off as a result. When the FOMC meeting occurs and uncertainty is removed, the market may react favorably even if at a headline it’s ‘bad’”.
But amongst traders, several opposite views are found on Bitcoin’s near-future. Michaël van de Poppe, on the other hand, commented that the market is dropping down, and “we’re looking for a bullish divergence to be created beneath the $46.5K area in order to have a reversal possible.”
The expert Ben Lilly compiled a market report that highlighted interesting warning signs.
The next year promises to be difficult. The Fed’s response will be unique and require new tools. It is a tough task to tone down inflation after unprecedented new money supply being added… All while not creating a massive deleveraging effect in the debt markets that could result in a recession.
Kaiko, the digital asset data provider for Bitcoin, also analysed price movements. According to Kaiko, Bitcoin has a stronger correlation with traditional stocks that it does with gold.
Overall, Bitcoin’s correlation with traditional equities has been on the rise while its correlation with gold has been mostly negative. … Risk-off sentiment seems to be driving similar investor responses for equities and crypto, disrupting Bitcoin’s narrative as a safe haven and inflation hedge.
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