Why Bitcoin Could Frustrate Bulls And Bears In 2022

Bitcoin is in a downward trend for several days, with a loss of 1.8% in just 24 hours and an adjustment of 10.5% in seven days. This benchmark cryptocurrency seems to be responding to macroeconomic factors, and may see more downside in the near future.

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Bitcoin is trading at $42,076 as of press time after having tested levels above $40,500. It remains to be seen whether current levels will remain stable and if the cryptocurrency market will continue its downward trend towards the $30,000s.

BTC showing a downward trend in the 4-hour charts. Source: BTCUSD tradingview

Today’s sell-off was apparently triggered by the release of the U.S. unemployment report. In December 2021 around 200,000 new jobs were added to this country’s economy, far below the expected number above 400,000.

With the U.S. forecasting an inflation rate of 7%, this has raised the chance that the Federal Reserve could raise interest rates. Therefore, the U.S. Federal Reserve will create less favorable conditions for global market participants and risk assets like Bitcoin.

NewsBTC yesterday reported that some experts feel risk assets might see blood and months in the short- to medium-term, but eventually benefit from an increase in interest rates. Mike McGlone, a senior commodity strategist at Bloomberg Intelligence, remains positive that Bitcoin will reach $100,000 by 2022.

On a different note, Director of Global Macro for investment firm Fidelity, Jurrien Timmer, thinks Bitcoin will “frustrate” bulls and bears alike. Many of the former expect a quick bounce towards McGlone’s price target, while the latter investors are targeting $30,000 and much lower. Timmer said:

Real rates could remain negative this year, which would make bitcoin and gold very attractive. But the “excess money” impulse (M2 growth less GDP growth) has all but vanished. One can only hope that both bitcoin and gold will frustrate bears as well as bulls by not doing much in 2022.

Source: Jurrien Timmer via Twitter

Bitcoin To Keep “Crab-like” Price Action In 2022?

Timmer also explains how Bitcoin, Gold and other assets have responded positively in response to an increase U.S. monetary supply. BTC may not perform as the FED attempts changes to its monetary policies.

As the FED helped to increase global liquidity, benchmark crypto witnessed an impressive rally during the first half in 2021. As the macroeconomic outlook changed, BTC moved in a sideways direction from $30,000 to $60,000 as BTC lost value. Arthur Hayes (ex-CEO of BitMEX) wrote about this subject:

Bitcoin traded in a sideways fashion since M2% growth stopped. If M2 is set to hit 0% — and possibly even go negative — in short order, the natural conclusion is that Bitcoin (absent any asymptotic growth in the number of users or transactions processed via the network) is likely to go much lower as well.

The outlook for 2022 seems to be more complex than anticipated and may contain unexpected turns and surprises.

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