Bitcoin has been trading below $21,000 as resistance, and it could be poised for another run to the upside over the coming days. Last week saw the cryptocurrency break out of its range, moving higher and recovering territory previously lost.
Bitcoin (BTC), which trades at $20,000.300, has seen sideways movements in the past 24 hours, and an average profit of 6% in the preceding days. With the U.S. publishing fresh economic data, this week could bring volatility to the markets.
Fed Pivot takes shape, Bitcoin likely to benefit
Per a recent market update from trading firm QCP Capital, the crypto market enjoyed “much-needed positivity.” There has been a lot of speculation regarding the reasons for the upside short time trend, but the macroeconomic conditions are the most likely cause.
In an effort to reduce inflation, the U.S. Federal Reserve (Fed), is increasing interest rates. The monetary policy is creating havoc in global markets. The U.S. Dollar has reached its highest level in twenty years, as investors seek refuge amid the economic uncertainties.
The U.S. currency is the only asset that thrives in this climate. Bitcoin and Gold have also suffered, as well as currencies such the Euro and Japanese Yen. The Fed therefore finds itself in a difficult spot.
While the financial institution is free to continue tightening and hiking monetary conditions, the U.S. Allies and elected officials are proving difficult. QCP Capital reports that the market started pricing in a Fed that is dovish, supporting the Fed pivot narrative.
This thesis is bullish for Bitcoin and risk assets and contemplates a shift in the Fed’s monetary policy to bring some relief to the market. According to the trading company, December saw a decrease in the likelihood of another 75 basis point hike.
Is There a New Story To Save Bitcoin?
The possibility of the Fed’s hiking at 75 bps dropped from 55% to 45% and could continue to decline due to internal and external pressure. Recent data shows that even the Fed is feeling the effects of the current economic environment.
As it charges more interest to money-market funds and banks than it does on its securities portfolio, the Fed is experiencing an operating loss.
The central bank, which sends all surpluses to the Treasury, can create an IOU so the loss doesn’t affect its operations https://t.co/1UepiR5HgZ
— Nick Timiraos (@NickTimiraos) October 31, 2022
QCP Capital wrote this:
Globally, other central banks have begun to exhibit dovishness. The BoC was the first to raise +50bps, vs +75bps anticipated. The ECB has loosened their forward guidance. This suggests that they may be near the end of the hiking cycle sooner than planned.
Overly optimistic traders are to be avoided. Bitcoin is still susceptible to macro forces in the short term, and the crypto market might negatively react to a “persistent hawkishness from the Fed,” QCP Capital concluded.