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| The latest moves in crypto markets, in context Edited by Omkar Godbole December 15, 2021 Sponsored by Bitcoin (BTC) See the latest price here Ether (ETH) See the latest price here If you were forwarded this newsletter and would like to receive it, sign up here.
Good morning, and welcome to First Mover. Here's what's happening this morning: Market Moves: Bitcoin May Have Priced In Fed's Hawkish Policy Shift
Technician's Take: Bitcoin's Bullish Inside Day
And check out the CoinDesk TV show "First Mover," hosted by Christine Lee, Emily Parker and Lawrence Lewitinn at 9:00 a.m. U.S. Eastern time.
– Omkar
Market Moves by Omkar Godbole The crypto market showed signs of life in Asia and Europe, with scaling solution Polygon's MATIC token and meme cryptocurrency Dogecoin extending Tuesday's gain.
Bitcoin, ether and the S&P 500 futures lacked a clear directional bias, perhaps on caution ahead of the all-important Fed meeting.
What's expected?
The central bank is widely expected to announce a $30 billion reduction in asset purchases starting in January 2022, doubling the pace two months prior in a bid to phase out the $120 billion per month program by March. Further, it is likely to signal two rate hikes in 2022.
What's priced in?
Markets have priced in an end of the QE program by March, with the Fed fund futures pulling forward the timing of the first interest rate hike to May. Further, futures have baked in a total of three rate hikes for next year. Bitcoin and dollar index (DXY) daily charts on Dec. 15 (TradingView) Risk assets, including bitcoin, have witnessed a significant amount of de-risking in recent weeks, perhaps in anticipation of the Fed turning hawkish in response to elevated price pressures in the economy. Bitcoin, for one, has declined over 30% since peaking near $69,000 on Nov. 10.
Potential bounce
So, the probability of a deeper sell-off on the Fed announcement is relatively low unless the central bank hints at more aggressive tightening than what’s baked in.
“De-risking in anticipation has been extensive. Many already panic sold. Positioning is light. Therefore, if the Fed were to deliver accelerated taper, signal two hikes for 2022, and nothing else, I would expect a rally across asset classes,” trader and analyst Alex Kruger tweeted.
Real rates to remain negative
There is consensus that the impending tightening hike cycle will see rates peak well below the high of 2.5% observed during the previous cycle dated December 2015 to December 2018.
According to Reuters, “markets are currently priced for a peak of just 1.5%-1.75%, a level that would likely not even top inflation.” Further, bond traders see rates averaging just 1.8% for the next three decades.
So, real or inflation-adjusted returns in the fixed income world are likely to remain negative for a prolonged time, perhaps driving yield-hungry investors to crypto.
Bitcoin and other asset prices may face selling pressure if the Fed signals a higher-than-expected peak. Also read: Bitcoin, Cardano, Ether and Everything Else Is Still Down 99% on CoinMarketCap
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Biggest Movers These are the biggest movers in the CoinDesk 20 over the past 24 hours:
Top Gainers: Polygon (MATIC): +9.5%, Sector: Smart Contract Platform Solana (SOL): +6.7%, Sector: Smart Contract Platform Bitcoin (EOS): +2%, Sector: CurrencyTop Losers: Dogecoin (DOGE): -10%, Sector: Currency Bitcoin cash (BCH): -1%, Sector: Currency Polkadot (DOT): -0.5%, Sector: Smart Contract PlatformThe CoinDesk 20 are 20 digital assets filtered from the larger universe of thousands of cryptocurrencies and constitute roughly 99% of the market by volume at eight of the largest and most trustworthy exchanges.
Technician's Take by Omkar Godbole Bitcoin's Bullish Inside Day Bitcoin's daily chart (Source: TradingView) Tuesday's inside day candle representing a narrowing of price range over the day suggests scope for a corrective bounce. Inside day candles are more bullish if appearing after a notable downtrend, as with bitcoin.
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Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.
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