Crypto Update: Bitcoin (BTC) Struggles to Push Higher as Ethereum (ETH) Takes the Spotlight

[MongiIG]

KEY TALKING POINTS:

• Cryptos digest the Fed’s announcement to start tapering asset purchases.
• BTC/USD and ETH/USD diverge over recent weeks.

Cryptos are trading a little softer this morning as markets digest the latest Federal Reserve meeting and its impact on risk appetite. The announcement of the start of the tapering cycle of its $120 billion-a-month asset purchases was widely expected, meaning that equities were unfazed, as was the Dollar. But cryptos are slightly weaker, and that’s not to say that the Fed’s policy has much of an impact on the crypto market, with fundamental movers still a sticky subject, but it would also be naïve to think that part of the rally in Bitcoin and its fellows wasn’t brought on by unprecedented levels of stimulus in markets.

The economic outlook is picking up, but inflation continues to be a cause for concern for many investors. The fact the Fed continues to stubbornly defend the “transitory” nature of price pressures means traditional assets are offering less return in real terms, which is, in turn, a positive driver for cryptos and other non-traditional assets that could be perceived as a hedge against the diminishing returns caused by inflation.

BTC/USD has been trading mostly sideways for the last 2 weeks as the effects of the previous rally are washing off. Investors are likely looking for the next catalyst for another leg higher but the absence of such is likely to leave Bitcoin vulnerable to a break below 60,000. That said, as I’ve mentioned previously, the latest rally was showing somewhat of a healthier pattern as it was extended over a longer time-period rather than just a few days, and the small pullbacks allowed new traders to create fresh buying momentum. This means the current highs are likely more sustainable, with recent price action having formed a pattern which could be constructed as a symmetrical triangle, with a narrowing body looking for a sustained break either side of 62,500.

BTC/USD Daily Chart

ETH/USD is also losing some momentum this morning but, unlike Bitcoin, it has continued reaching for new all-time highs throughout the past few days. The fact that some of the most looked-out-for alt-coins (Shina Inu, Dogecoin, etc) run on the ether blockchain means that a rise in their price, like the one we have witnessed in recent days, burn more ether tokens than the ones being produced, pushing up the price of Ethereum coins.

The coin is just shying away from its current all-time high (4,666), consolidating around 4,500 where short-term support seems to have settled in. It’s hard to find a bearish case for Ethereum on a technical perspective, especially after it continues to break new highs on convincing momentum. The ascending trendline - which has been a good reference for support in the past - is now sitting around 4,400, so we may see a small correction to this area before gains are extended towards 5,000.

ETH/USD Daily chart

Written by Daniela Sabin Hathorn, Market Analyst, 4th November 2021. DailyFX