Since March 2022, traders and analysts have been forecasting the possibility that the US Federal Reserve willFed) policy changes. Obviously, such a move would prove the only viable option for the Fed is to sink into oblivion, devaluing the dollar even further. Bitcoin is the future reserve asset and store of value of the world.
On November 2nd, the Fed raised interest rates by 0.75% and stocks, cryptocurrency price increase as usual.
But this time there is a change. Ahead of the US Federal Open Market Committee (FOMC) meeting, there were some unconfirmed leaks that said the Fed and the White House were considering a "change of policy".
Following comments made by the FOMC and during Jerome Powell's press conference, Powell emphasized that the Fed is aware of and is monitoring the policy process that affects markets. At the same time, the possibility of a slow rate increase is being considered.
“To get the stance of monetary policy restrictive enough to bring inflation back to 2% over time. In determining future growth rates within the target range, the Committee will take into account the total tightening of monetary policy, the lag by which monetary policy affects economic activity and inflation, as well as economic development. economics and finance”.
The shock here is not the price Bitcoin fell back before the FOMC meeting, rose after interest rates were announced to rise as expected and then fell back before the stock market closed. This was expected and wouldn't be surprising if BTC back to the lower end of the $21,000 region as $20,000 seems to be consolidating as support.
What is surprising is that there was little signal of policy change from the Fed Chair's presentation and the market did not react accordingly. It is a lesson for those who place buy orders because they believe these stories too much.
Trading on FOMC moves, consumer price index (CPI) and interest rate hikes is not an effective strategy. However, if you are a day trader, have deep pockets to benefit from those 2% or 4% moves, or are a skilled, experienced professional trader, then you can give it a try. But this approach can really cause headaches for traders according to the chart below by Jarvis Labs.
Price action BTC before and after FOMC events | Source: Jarvis Labs
It should be noted that intraday price movements from lower daily timeframes are irrelevant here if your motive is Long and cumulative. So instead of focusing on micro-events like how the Fed will continue to raise rates – a policy the Fed is determined to implement until inflation falls below its 2% target level, consider other indicators. assess the current market structure and expected performance of Bitcoin.
On-chain data shows it's time to accumulate
Bitcoin Yardstick Index | Source: Glassnode and Capriole Investments
On November 1st, Capriole Investments founder Charles Edwards launched a new on-chain metric called Bitcoin Yardstick. Follow Edwards, this metric takes “Bitcoin market cap/hashrate and normalizes (divided by) the 2-year average” to derive “the ratio of energy required to secure the Bitcoin network relative to price.”
Edwards explained that “lower indicator = cheaper Bitcoin = better value”. In his opinion:
“We are now seeing valuations not seen since Bitcoin was at $4,000-6,000.”
Similar to the recent report of Glassnode, Edwards also believes that long-term holders have surrendered. After quoting the chart below, Edwards said:
“Unrealized Net Profit and Loss (NUPL) is showing long-term holders losing value. We are entering a surrender zone (red) that has only been seen every four years in the past.”
As discussed last week, many on-chain indicators are at multi-year lows and there is enough precedent to suggest that the upside far outweighs the potential downside for the time being.
Is Bitcoin's MACD Histogram Turning Bullish?
Another metric that resonates with traders is the MACD. Throughout the week, many traders have cited the indicator, noting the convergence of the MACD signal line and the histogram turning “green” on the weekly timeframe as encouraging signs that Bitcoin is in the middle of nowhere. bottoming process.
Bitcoin 1-week MACD | Source: TradingView
While the indicator should not be interpreted as a pure signal alone, crossovers on the weekly and monthly timeframes with the histogram turning from red to green are usually associated with steady upward momentum.
The source: Demelza Hays
While the data cannot confirm whether the market is indeed bottoming out, a comparison of the current results with the previous cycle and Bitcoin's price action shows that BTC is undervalued in the range. present.
The crypto king may be bottoming out, but this doesn't rule out the possibility of a seasonal sell-off involving the equities and crypto markets that could trigger a drop to yearly lows.