The ‘blinkenlights’ are flashing on the desks of Bitcoin traders as the cryptocurrency’s per coin value slumps to just over $41,000 per coin.
Yesterday, as Bitcoin deflated, we reported on some of the context with analysts debating whether the Federal Reserve is going to take assertive measures to course correct the economy.
Today it seems that these plans are achieving more solidity, and it’s more a question of how they’re going to affect markets.
Omkar Godbole has been conducting detailed and profound analysis of cryptocurrencies for years, and has some additional insight on what’s happening with Bitcoin.
“Bitcoin continues to lose ground as minutes from the Federal Reserve’s December meeting released earlier this week flagged the chance of a faster policy tightening,” Godbole writes this morning at Coindesk. “The downward move gathered pace on Wednesday after the Fed minutes revealed policymakers discussed aggressive interest rate hikes alongside a faster pace of balance sheet normalization, dubbed quantitative tightening (QT) – the opposite of liquidity-boosting balance sheet expansion. The hawkish tone took a toll on equities, with tech stocks bleeding for the second consecutive day on Thursday.”
Godbole’s coverage further reveals that $200 million in BTC long positions was liquidated, contributing to the bear market for Bitcoin right now.
For contrast, Godbole also quotes Jeff Dorman, CIO at Arca, as saying Bitcoin has been a “risk-of/risk-off (sic) asset lately,” – though someone familiar with finance jargon will assume it’s meant to read “risk-on/risk-off.”
Godbole also references other relevant economic indicators.
“On Thursday, the U.S. two-year treasury yield, which mimics short-term interest rate and inflation expectations better than the 10-year yield, rose to a 22-month high of 0.87%,” he writes. “The short-term yield has more than doubled to 0.76% in the past quarter, according to TradingView. The yields may rise further if the U.S. non-farm payrolls data scheduled for release at 13:30 UTC on Friday show the pace of job additions nearly doubled to 400,000 in December, as expected. That would validate the Fed’s recent hawkish pivot.”
With Bitcoin down near $41,000 and Ethereum down to $3100, it’s a gut check time for crypto fans who have invested during more ebullient times.
Ask yourself: what is the Federal Reserve actually preparing to do?
And what will that actually do to crypto markets?