Bitcoin (BTC) rise or fall? What’s really going on with the BTC price? According to crypto analyst Big Smokey, the data shows that BTC is finally forming a bottom. But is it time to buy? We have prepared the analyst’s assessments and forecasts for our readers.
“I wouldn’t be surprised if Bitcoin returns to the lower end of $21,000”
Since March 2022, traders and analysts have been predicting a policy change or pivot from the Fed. Such a move would likely prove to be the Fed’s only current option to sink into oblivion, further depreciating the dollar and glorifying Bitcoin (BTC) as the world’s future reserve asset and ultimate store of value.
cryptocoin.comAs you can follow, on November 2, the Fed increased interest rates by 75 bps, in line with expectations. Then, stocks and cryptocurrencies rallied as they usually do. But this time there was something wrong. Prior to the Federal Open Market Committee (FOMC) meeting, there were several unconfirmed leaks stating that the Fed and White House were considering an ‘axis of policy’.
Commenting on the FOMC’s comments and during Jerome Powell’s press conference, Powell said the Fed is aware of and is monitoring how policy is affecting markets. He also stressed that the Fed accepts and takes into account the delay in interest rate hikes. The Fed said:
It is necessary to achieve a sufficiently restrictive monetary policy stance to return inflation to 2% over time. When determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the delays of monetary policy in influencing economic activity and inflation, and economic and financial developments.
Sounds a bit pivot-y, right? The crypto market didn’t seem to think. Bitcoin, altcoins and stocks pulled back short single digit gains shortly after Powell made his live comments. The shock here is not that the BTC price pulled back before the FOMC meeting, rallied after the predicted increase was announced, and then pulled back before the stock market closed. This is expected. However, I wouldn’t be surprised if BTC returns to the lower end of $21,000 as $20,000 solidifies as support.
How should I position?
What was surprising was that there was some pivot language and the markets did not react accordingly. Let this be a lesson in buying narratives too deeply. In my opinion, trading with FOMC, Consumer Price Index (CPI) and interest rate hikes is not the right way. Of course, if you’re a day trader, have deep pockets to take advantage of those 2% or 4% moves, or are an experienced, skilled professional trader, then that’s fine. However, trading the FOMC and CPI, as in the chart below from Jarvis Labs, can really tear investors apart.
If your reason is to stay long in Bitcoin and increase the stack, I think daily price movements from Bitcoin are negligible in a shorter time frame than daily. So instead of focusing on micro-events such as how the Fed continues to increase rates until inflation hits its 2% target, a policy on which it is committed, let’s look at other metrics that assess Bitcoin’s current market structure and projected performance.
On-chain data shows it’s time to pile up for Bitcoin
Charles Edwards, founder of Capriole Investments, has launched a new on-chain metric called Bitcoin Yardstick. According to Edwards, the metric “normalized (divided) the Bitcoin Market-Cap/Hash-Rate and the 2-year average” essentially takes the “price-related ratio of the energy work done to secure the Bitcoin network.”
Edwards explains that “lower data = cheaper BTC = better value.” He also says, “We are seeing unheard of valuations today, like when Bitcoin was at $4-6k.” Similar to Glassnode’s latest report, Edwards says long-term holders have already surrendered. After quoting the chart above, Edwards says:
Net unrealized profit and loss (NUPL) shows a purge of long-term holders. We entered the capitulation zone (red), which was seen only once every 4 years in the past.
We also discussed this in last week’s Bitcoin on-chain update. On-chain metrics are at their lowest in several years. There is currently enough precedent to suggest that the upside gains far outweigh the downside potential.
Is Bitcoin’s MACD histogram bullish?
Another metric causing a buzz in trader circles is the moving average convergence divergence (MACD). Throughout the week, multiple traders noted a convergence between the signal line and the MACD. He also noted that the histogram turned ‘green’ on the weekly time frame. To them, they were encouraging signs that Bitcoin was in the process of bottoming out.
The indicator is intended to be interpreted as an isolated pure signal. However, the histogram turning from red to green, as well as the shifts on the weekly and monthly timeframes have generally been accompanied by a steady rise in bullish momentum.
The data does not confirm whether a market bottom is actually inside. However, comparing current data with previous market cycles and Bitcoin’s price action shows that BTC is undervalued in its current range. It is possible that BTC is seeing a bottom. But that doesn’t rule out the possibility of a sell-off that will catalyze a quick wick to a year-low.
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