Since March 2022, traders and so-called analysts have been forecasting a change in policy or a turnaround from the US Federal Reserve.
Apparently, such a move would prove that the only option available to the Fed is to print into oblivion, further diminishing the value of the dollar and enshrining Bitcoin (BTC) as the world’s future reserve asset and ultimate store of value.
Well, on November 2, the Fed high interest rates at the expected 0.75%, and stocks and cryptocurrencies rallied as usual.
But this time, there was a twist. Before the Federal Open Market Committee (FOMC) meeting, there were some unconfirmed leaks indicating that the Fed and the White House were considering a “policy shift”.
According to comments issued by the FOMC and during Jerome Powell’s press conference, Powell emphasized that the Fed is aware of and monitors how policy is affecting markets and that the latency of interest rate hikes is recognized and considered. .
the fed fixed:
“In order to achieve a monetary policy stance that is tight enough for inflation to return to 2 percent over time. In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.
Sounds a bit pivot-y, doesn’t it? The crypto market seemed to think not, and shortly after Powell gave his live comments, Bitcoin, altcoins, and stocks retraced their brief single-digit gains.
The surprise here is not that Bitcoin price pulled back before the FOMC meeting, rallied after the estimated increase was announced, and then pulled back before the stock market closed. This is to be expected, and I would not be surprised if BTC returns to the lower end of $21,000 as $20,000 appears to solidify as support.
What is surprising is that there was a bit of pivot language and the markets did not react accordingly. Let that be a lesson in buying narratives too deeply.
In my opinion, negotiating with the FOMC, the consumer price index (CPI) and rate hikes is not the way to go. Sure, if you are a day trader, have deep pockets to profit from those 2% or 4% moves or are an experienced and qualified professional trader then go for it. But, as the chart below from Jarvis Labs shows, trading the FOMC and CPI can really kill off traders.
I am of the opinion that intraday Bitcoin price movements on a less than daily time frame are irrelevant if your motive is to long Bitcoin and increase the stack. So instead of focusing on micro-events like how the Fed continues to raise rates, a policy where it’s set on until inflation drops to its 2% target, let’s look at other metrics that assess market structure. Bitcoin’s current and projected performance.
On-chain data suggests it’s time to stock up
On November 1, Capriole Investments founder Charles Edwards introduced a new on-chain metric called Bitcoin Yardstick. According to Edwards, the metric taking “Bitcoin Market-Cap/Hash-Rate, and normalized (divided by) the 2-year average” to essentially take “the ratio of energy work done to secure the Bitcoin network relative to price.”
Edwards explains that “lower readings = cheaper Bitcoin = better value” and, in his opinion:
“Today we are seeing unprecedented valuations since Bitcoin was $4-6K.”
Similar to Recent Glassnode ReportEdwards also believes that long-term holders have already capitulated. After quoting the chart below, Edwards said:
“Net unrealized profits and losses (NUPL) are showing a long-term headline washout. We have entered the capitulation (red) zone seen only once every 4 years in the past.”
As discussed in Last Week’s Bitcoin On-Chain UpdateMultiple on-chain metrics are at multi-year lows, and there is enough precedent to suggest that the gains to the upside far outweigh the potential to the downside at this point.
Has Bitcoin’s MACD Histogram Turned Bullish?
Another metric causing a stir in trading circles is the moving average convergence divergence (MACD). Throughout the week, several traders cited the indicator, noting a convergence between the signal line and the MACD and the histogram turning “green” on the weekly time frame as encouraging signs that Bitcoin is in the process of falling. bottom.
While the indicator should not be interpreted as a pure signal in isolation, the crossovers on the weekly and monthly timeframes, along with the histogram turning from red to green, have generally been accompanied by a steady increase in bullish momentum.
While the data cannot confirm whether or not the market has actually bottomed, comparison of the current readings to previous market cycles and Bitcoin price action suggests that BTC is undervalued in its current range.
The price of BTC may be bottoming out, but this does not rule out the possibility of an occasional sell-off related to the cryptocurrency and equity market that could catalyze a quick fuse to the yearly low.
This newsletter was written by Big Smokey, the author of The Humble Pontiff Substack and author of the resident newsletter at Cointelegraph. Every Friday, Big Smokey will write market insights, trend instructions, analysis, and early research on potential emerging trends within the crypto market.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.