Since March 2022, traders and so-called analysts have been predicting a policy shift or pivot 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 future global reserve asset and ultimate store of value.
Well, on November 2, the Fed raised interest rates by the expected 0.75%, and stocks and crypto rallied as usual.
But this time there was a twist. Ahead of the Federal Open Market Committee (FOMC) meeting, there were a few unconfirmed leaks indicating that the Fed and White House were considering a “policy pivot.”
According to comments published by the FOMC and at Jerome Powell’s press conference, Powell emphasized that the Fed is aware of and monitors the impact of policy on markets and that the latency of interest rate hikes is recognized. and taken into account.
The Fed said:
“To achieve a monetary policy stance tight enough to bring inflation down to 2% over time. In determining the pace of future increases in the target range, the committee will consider the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.
It’s a bit pivotal, isn’t it? The crypto market seemed to think not, and soon after Powell gave his live comments, Bitcoin, altcoins and stocks retracted their brief single-digit gains.
The shock here is not that Bitcoin’s price pulled back before the FOMC meeting, rallied after the estimated rise was announced, and then pulled back before the stock market closed. This is to be expected, and I wouldn’t be surprised if BTC moves back to the lower end of $21,000 since $20,000 appears to be solidifying as support.
What is surprising is that there was a spike in pivotal language and markets did not react accordingly. Let this be a lesson on buying too deep into stories.
In my view, trading the FOMC, Consumer Price Index (CPI) and rate hikes is not the way to go. Of course, if you are a day trader, have deep pockets to benefit from those 2% or 4% moves, or are an experienced and skilled professional trader, then go for it. But, as the following chart from Jarvis Labs shows, trading the FOMC and CPI can really only cut traders off.
It is my opinion that intraday bitcoin price movements over a less than daily timeframe are irrelevant if your motive is to go long bitcoin and increase the stack. So instead of focusing on micro-events like how the Fed keeps raising rates, a policy it’s fixated on until inflation drops to its 2% target, let’s look at other metrics that assess Bitcoin’s current market structure and projected performance.
Related: Why is Bitcoin price up today?
On-chain data suggests it’s time to accumulate
On November 1, Capriole Investments founder Charles Edwards launched a new on-chain metric called Bitcoin Yardstick. According to Edwards, the metric takes “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 see unprecedented valuations as Bitcoin was $4-6,000.”
Similar to the recent Glassnode report, Edwards also believes that long-term holders have already capitulated. After citing the table below, Edwards said:
“Net Unrealized Profit and Loss (NUPL) shows a washout among long-term holders. We have entered the surrender zone (red) seen only once every 4 years in the past.
As noted in last week’s Bitcoin on-chain update, several on-chain metrics are at multi-year lows, and there is enough precedent to suggest that the upside gains far outweigh the downside potential for the bitcoin. moment.
Has Bitcoin’s MACD Histogram Turned Bullish?
Another metric that is buzzing 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 MACD and the histogram turning “green” on the weekly timeframe as encouraging signs that Bitcoin is in a bottoming process.
Although the indicator is not intended to be interpreted as a pure isolated signal, the crossovers on the weekly and monthly time frame, as well as the histogram changing from red to green, have generally been accompanied by a constant increase in the bullish momentum.
Although the data cannot confirm whether a market bottom is truly being reached, comparing the current readings with previous market cycles and Bitcoin’s price action suggests that BTC is undervalued in its current range.
BTC price may be bottoming out, but that doesn’t rule out the possibility of occasional sell-offs related to the crypto and equity market that could catalyze a quick wick to the yearly low.
This newsletter was written by Big Smokey, the author of The Humble Pontificator Substack and resident newsletter writer at Cointelegraph. Every Friday, Big Smokey will write market insights, practical trend tips, analysis, and early research on potential emerging trends in the crypto market.
The views and opinions expressed herein 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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