On Sunday, January 9, Bitcoin (BTC) price It has bounced back and managed to break its six-day sideways move from last week. As of press time, Bitcoin is trading at $42,198 with a market cap of $798 billion.
As some analysts commented, the on-chain and RSI levels seem to indicate a trend reversal. However, Bitcoin (BTC) ‘US Inflation Data’, a more important market data that will determine the price, will be released this Wednesday.
CPI data will decide whether the Fed will turn to more aggressive quantitative tightening (QT), which could ultimately decide the liquidity in the market, driving crypto prices higher.
Interesting Analysis by Alex Krüger
On Sunday, January 9th, the popular market analyst Alex Krugerraised an interesting thread on Twitter about how Fed decisions and CPI inflation data will affect Bitcoin and the overall crypto space.
The Fed has ‘hawked’ even more recently, announcing three rate hikes for 2022. This happened after Fed Chairman Jerome Powell realized that inflation was no longer “temporary” but a serious concern. So, to keep inflation under control, the Fed has no choice but to raise interest rates.
While the Fed will tend to adopt quantitative tightening (QT) measures, it will tend to withdraw liquidity from the system, namely the market.
According to Krüger, the falconry of the Fed may be one of the reasons why ‘crypto holdings have dropped by 15-30% in the last two days’.
But how important is it to crypto assets? About this, Krüger noted: “Simple. Crypto assets are at the extreme end of the risk curve. As they benefit from extraordinarily loose monetary policy, they also suffer unexpectedly from tight monetary policy as money slides into safer asset classes.”
Krüger also “Bitcoin is now a macro-asset that is traded as a proxy for liquidity conditions. As liquidity dwindles, struggling macro players are now selling Bitcoin, followed by all cryptos.”
The market analyst expects Bitcoin price to remain volatile in the $41,000-$44k range until CPI data comes in this Wednesday.
If the CPI turns out to be lower than expected, the Bitcoin price could explode. However, if the inflation figures are higher than Street forecasts, Bitcoin has the potential to go below the 30s.
It would seem that one should hold the horses so far before anticipating any trend reversal and instead wait for clear signs ahead.
Disclaimer: What is written here is not investment advice. Cryptocurrency investments are high-risk investments. Every investment decision is under the individual’s own responsibility. Finally, Koinfinans and the author of this content cannot be held responsible for personal investment decisions.