Mike Novogratz Says Bitcoin Should Bottom Around $40K, Sees ‘Tremendous’ Demand From Institutional Investors

Mike Novogratz Says Bitcoin Should Bottom Around $40K, Sees 'Tremendous' Demand From Institutional InvestorsGalaxy Digital CEO Mike Novogratz expects the price of bitcoin to bottom at around $38K-$40K. “I know big institutions who are going through their process to put positions on. They’re going to see those as attractive levels to buy,” he said. Mike Novogratz on Future Outlook of Crypto Market The CEO of Galaxy Digital, Mike […]
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Bitcoin crash ahead? Expert warns higher inflation could whip BTC price to $30K

The warning appears against the U.S. Federal Reserve’s intention to tighten its asset purchasing program rapidly, followed by three rate hikes in 2022.

Bitcoin (BTC) may end up falling to as low as $30,000 if the U.S. inflation data to be released on Wednesday comes any higher than forecasted, warns Alex Krüger, founder of Aike Capital, a New York-based asset management firm.

The market expects the widely-followed consumer price index (CPI) to rise 7.1% for the year through December and 0.4% month-over-month. This surge highlights why the U.S. Federal Reserve officials have been rooting for a faster normalization of their monetary policy than anticipated earlier.

U.S. headline inflation. Source: Bureau of Labor Statistics, Bloomberg

Further supporting their preparation is a normalizing labor market, including a rise in income and falling unemployment claims, according to data released on Jan. 7.

“Crypto assets are at the furthest end of the risk curve,” tweeted Krüger on Sunday, adding that since they had benefited from the Fed’s “extraordinarily lax monetary policy,” it should suffice to say that they would suffer as an “unexpectedly tighter” policy shifts money into safer asset classes.

Excerpts:

“Bitcoin is now a macro asset that trades as a proxy for liquidity conditions. As liquidity diminishes, macro players now in the fray sell bitcoin, and all of the crypto follows.”

The first interest rate hike in March 2022?

The Fed has been buying $80 billion worth of government bonds and $40 billion worth of mortgage-backed securities every month since March 2020. Meanwhile, the U.S. central bank has kept its benchmark interest rates near zero, thus making lending to individuals and businesses cheaper.

BTC/USD vs. Fed balance sheet. Source: TradingView

But the collateral damage of a loose monetary policy is higher inflation, which reached 6.8% in Nov. 2021, the highest in almost four decades.

So now the Fed, which once claimed that rising consumer prices are “transitory,” has switched its stance from expecting no rate hikes in 2022 to discussing three hikes alongside their balance sheet normalization.

“It’s more dramatic than what we anticipated and the Fed’s pivot to a more hawkish stance has been the surprise,” Leo Grohowski, the chief investment officer of BNY Mellon Wealth Management, told CNBC, adding:

“Most market participants expected higher rates, less accommodative monetary policy, but when you look at the fed funds implying a 90% chance of a hike in March, on New Year’s Eve that was just 63%.”

Mini bear market?

Mike McGlone, the senior commodity strategist at Bloomberg Intelligence, called $40,000 an important support level in the Bitcoin market. Furthermore, he anticipated that the cryptocurrency would eventually come out of its bearish phase as the world becomes digital and treats BTC as collateral.

BTC/USD daily price chart featuring $40K-level’s history as support. Source: TradingView

The statement arrived as Bitcoin’s drop from its Nov. 8 record high of $69,000 is now over 40%. According to Eric Ervin, chief executive officer at Blockforce Capital, the drop has primarily washed off recent investors, leaving the market with long-term holders.

It could be the beginning of a “mini bear market,” the executive told Bloomberg, adding that such corrections are “completely normal” for crypto investors.

Related: Bitcoin performs classic bounce at $40.7K as BTC price comes full circle from January 2021

Krüger also noted that Bitcoin has already dropped too much from its record highs, insofar that it now stands technically oversold. So, if the CPI reading surprises on the downside, markets could expect the BTC price to pop and trend for a while.

“Wednesday will have the US inflation data,” Krüger said, adding:

“Think prices should chop around 41k and 44k until then, with an upwards skew given how strong the rejection of the lows has been.”

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 conduct your own research when making a decision.

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Will this time be different? Bitcoin eyes drop to $35K as BTC price paints ‘death cross’

While recent bearish crossovers between Bitcoin’s 50-day and 200-day exponential moving averages failed to push prices lower, this time could be different.

Bitcoin (BTC) formed a trading pattern on Jan. 8 that is widely watched by traditional chartists for its ability to anticipate further losses.

In detail, the cryptocurrency’s 50-day exponential moving average (50-day EMA) fell below its 200-day exponential moving average (200-day EMA), forming a so-called “death cross.” The pattern appeared as Bitcoin underwent a rough ride in the previous two months, falling over 40% from its record high of $69,000.

BTC/USD daily price chart. Source: TradingView

Death cross history

Previous death crosses were insignificant to Bitcoin over the past two years. For instance, a 50-200-day EMA bearish crossover in March 2020 appeared after the BTC price had fallen from nearly $9,000 to below $4,000, turning out to be lagging than predictive.

Additionally, its occurrence did little in preventing Bitcoin from rising to around $29,000 by the end of 2020, as shown in the chart below

BTC/USD daily price chart featuring March 2020 death cross. Source: TradingView

Similarly, a death cross appeared on the Bitcoin daily charts in July 2021 that — like in March 2020 — was more lagging and less predictive. Its occurrence did not lead to a massive selloff. Instead, BTC’s price merely consolidated sideways before rallying to $69,000 by November 2021.

BTC/USD daily price chart featuring death cross. Source: TradingView

But the bearish moving average crossovers in both the instances, as mentioned above, accompanied a piece of good news, which may have limited their impact on the Bitcoin market.

For instance, the Bitcoin price recovery in July 2021 came majorly in the wake of rumors that Amazon would start accepting cryptocurrencies for payments — that later turned out to be false — and following a conference, dubbed “The B-Word,” which saw Twitter CEO Jack Dorsey, Tesla CEO Elon Musk, and ARK Invest CEO Cathie Wood speaking highly in favor of Bitcoin.

Similarly, Bitcoin recovered sharply from its below $4,000-levels in March 2020, primarily after the U.S. Federal Reserve announced its loose monetary policies to contain the aftermath of the coronavirus pandemic-led stock market crash.

The death cross this time looks dangerous

Bitcoin’s latest decline reflected growing investor concern about the Fed’s decision to aggressively unwind its loose monetary policies—including the dialing back of its $120 billion a month asset purchasing program followed by three rate hikes—in 2022.

Typically, rising interest rates make holding volatile assets like Bitcoin less appealing than government bonds, which offer guaranteed yields.

“This is proof that bitcoin acts like a risk asset,” Noelle Acheson, head of market insights at crypto lender Genesis Global Trading, told the Wall Street Journal, adding that the short-term holders would be the “closest to the exit.”

Related: Bitcoin may pass $30K September lows, trader warns

As a result, the overall reduction in cash liquidity, coupled with the death cross formation, could trigger further selloffs in the Bitcoin market. However, that is unless the BTC price rebounds from its current support level around $40,000, the 0.382 Fib line  shown in the chart below.

BTC/USD daily price chart featuring Fib retracement levels. Source: TradingView 

Nonetheless, a break below $40,000 may risk sending the Bitcoin price to the next Fib line support near $35,000.  

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 conduct your own research when making a decision.

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QE Infinity: US Fed to Keep Rates at Zero, Billion-Dollar Bond Purchases Until Economy Recovers

QE Infinity: US Fed to Keep Rates at Zero, Billion-Dollar Bond Purchases Until Economy RecoversThis week the U.S. Federal Reserve met for two days at the Federal Open Market Committee meeting and detailed that it would keep short-term borrowing rates at near zero. Meanwhile, the Fed also stated that it would continue buying bonds until the U.S. economy returns to full employment. America’s central bank met this week for […]

The post QE Infinity: US Fed to Keep Rates at Zero, Billion-Dollar Bond Purchases Until Economy Recovers appeared first on Bitcoin News.

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