Jump to content

Bitcoin, Ether lead the Decline in Cryptocurrencies after Hawkish Fed Minutes Released


Recommended Posts

ANALYSIS:

  • Fed minutes signals greater urgency to reign in stimulus and hike rates
  • Non-interest bearing, risky BTC and ETH take a hit on hawkish Fed sentiment
  • BTC and ETH relevant technical levels analyzed
Bitcoin, Ether lead the Decline in Cryptocurrencies after Hawkish Fed  Minutes Released

FED TO TIGHTEN MONETARY POLICY FASTER THAN ANTICIPATED

The Federal Reserve Bank released the minutes of its December meeting on Wednesday this week, elaborating that there is a greater urgency to scale back the unprecedented level of support for the US economy, mainly due to stubbornly high inflation as the job market also approaches full employment.

The Fed has already admitted well before the December meeting that inflationary pressures were no longer merely ‘transitory’, however, the minutes communicated a sense of urgency that had previously been lacking. The minutes revealed that “it may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated”.

The reaction in Bitcoin - the world’s largest cryptocurrency by market cap – saw the digital coin trade around 8% lower with other large cryptocurrencies following suite. Bitcoin, the tech sector and generally risky assets largely benefitted from the Fed’s ultra-loose monetary policy since the pandemic which looks to be coming to an end sooner than expected. A similar reaction was witnessed in the tech heavy indices of the Nasdaq and FAANG index, while the S&P 500 also experienced a sizeable drop.

Recent Performance of Major Cryptocurrencies

Bitcoin, Ether lead the Decline in Cryptocurrencies after Hawkish Fed Minutes Released

Source: Coinmarketcap.com

FED GIVES SIDEWAYS-MOVING BITCOIN AN UNWANTED PUSH

Bitcoin ended 2021 in a rather choppy fashion as it consolidated after a rather heavy drop from the all-time high (around 68,900). Higher future interest rates and less liquidity flowing into the economy tends not to favor risky assets and cryptocurrencies are arguable one of the riskiest assets around. Bitcoin and Ether are non-interest bearing vehicles and in a rate hiking environment, traders and investors tend to shift out of these types of investments towards higher yielding alternatives. This dynamic has also resulted in a sharp decline in gold – a commodity with characteristics often compared to bitcoin.

Bitcoin broke below the horizontal channel (consolidation pattern) resuming the longer term downtrend since the all-time high. BTC now faces the zone of support between 41,500 and 42,500 with the psychological round number of 40,000 not too far away. A break below 40,000 may prove to be the tipping point, and could very well lead to further declines as the next major level comes in at 30,000.

Bitcoin (BTC) Daily Chart

Bitcoin, Ether lead the Decline in Cryptocurrencies after Hawkish Fed Minutes Released

Chart prepared by Richard Snow, IG

Ethereum (ETH) initially held up a little better than BTC but has since broken below the price action formation resembling a large falling wedge. 3385 looks to be the current level of support with 2930 thereafter.

Ethereum (ETH) Daily Chart

Bitcoin, Ether lead the Decline in Cryptocurrencies after Hawkish Fed Minutes Released

Chart prepared by Richard Snow, IG

Ether/Bitcoin is holding up, albeit within the descending channel and now looks to test 0.07763 before 0.07390. The fact that both cryptos are dropping at the same time means that drastic moves in this pair seem unlikely – such is the correlated nature of the crypto market. It remains to be seen which crypto will out perform the other as price action after the Fed minutes unfolds.

Ether/Bitcoin (ETH/BTC) Daily Chart

Bitcoin, Ether lead the Decline in Cryptocurrencies after Hawkish Fed Minutes Released

Chart prepared by Richard Snow, IG

 

Written by Richard Snow for DailyFX.com. 6th Jan 2022

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • Asian-Pacific stocks traded mostly flat to start the week, with light weekend newsflow focused on geopolitics. In Europe, equity futures point to a lower open after gains on Friday. The calendar this week focuses on inflation , with Japan kicking off the world tour of price data today. This is followed up by US PCE data on Wednesday, German CPI on Thursday and then the eurozone reading on Friday. While today begins quietly on the earnings front, UK earnings crowd the rest of the week, taking over from the US as reporting season there enters its final weeks.   
    • NZDUSD Elliott Wave Analysis Trading Lounge Day  Chart, 26 February 24 New Zealand Dollar/U.S.Dollar (NZDUSD) Day Chart NZDUSD Elliott Wave Technical Analysis FUNCTION:   Trend MODE: Impulsive STRUCTURE: Blue wave 1 POSITION:  Black wave 3 DIRECTION NEXT LOWER DEGREES: Blue wave 2 DETAILS:black wave 2 looking completed at 0.60363 .  Now blue wave 1 of black  wave 3  is in play. Wave Cancel invalid level: 0.60512 The "NZDUSD Elliott Wave Analysis Trading Lounge Day Chart" dated 26 February 24, provides a comprehensive analysis of the New Zealand Dollar/U.S. Dollar (NZDUSD) currency pair on a daily timeframe, employing Elliott Wave principles to discern potential market movements. The designated "FUNCTION" is "Trend," indicating the primary objective is to identify and capitalize on the prevailing market direction. In this context, the focus is on capturing impulsive waves that define the strength and persistence of the overarching trend. The specified "MODE" is "Impulsive," signaling a market environment characterized by strong, forceful, and directional price movements. This suggests that the current phase in the market is conducive to identifying and participating in the primary trend. The described "STRUCTURE" is "Blue wave 1," denoting the specific wave within the Elliott Wave hierarchy. Blue wave 1 represents the initial phase of a larger impulsive move, typically marking the beginning of a new trend. The identified "POSITION" is "Black wave 3," indicating the current position within the broader Elliott Wave pattern. Wave 3 is often the most dynamic and extended wave in the sequence, reflecting a powerful surge in the direction of the dominant trend. In terms of "DIRECTION NEXT LOWER DEGREES," the analysis emphasizes "Blue wave 2," suggesting the anticipated corrective phase following the completion of black wave 3. The "DETAILS" section notes that "black wave 2 looking completed at 0.60363. Now blue wave 1 of black wave 3 is in play." This suggests the conclusion of a corrective phase (black wave 2) and the initiation of the next impulsive move (blue wave 1 of black wave 3). The "Wave Cancel invalid level" is set at 0.60512, serving as a critical reference point. A breach beyond this level would invalidate the current wave count and prompt a reevaluation of the analysis. In summary, the NZDUSD Elliott Wave Analysis for the daily chart on 26 February 24, indicates a continuation of the impulsive move, with blue wave 1 of black wave 3 in progress. Traders are advised to monitor the unfolding of blue wave 1 and consider the invalidation level at 0.60512.       NZDUSD Elliott Wave Analysis Trading Lounge 4 Hour  Chart, 26 February 24 New Zealand Dollar/U.S.Dollar (NZDUSD) 4 Hour Chart NZDUSD Elliott Wave Technical Analysis FUNCTION:   Trend MODE: Impulsive STRUCTURE: red wave 3   POSITION:  Blue wave 1 DIRECTION NEXT LOWER DEGREES: red wave 4 DETAILS:red wave 2 of blue wave 1 looking completed at 0.60512 .  Now red wave 3 of blue wave 1  is in play. Wave Cancel invalid level: 0.60512 The "NZDUSD Elliott Wave Analysis Trading Lounge 4 Hour Chart" dated 26 February 24, presents a detailed analysis of the New Zealand Dollar/U.S. Dollar (NZDUSD) currency pair using Elliott Wave principles. The focus is on a 4-hour chart, allowing for a more granular examination of price movements. The identified "FUNCTION" is "Trend," indicating that the analysis aims to capture the prevailing direction in the market. This suggests an interest in identifying and riding the impulsive waves that contribute to the overall trend. The specified "MODE" is "Impulsive," signaling that the current market conditions are characterized by strong, forceful, and directional price movements. Impulsive waves typically indicate the primary trend's strength and persistence. The described "STRUCTURE" is "Red wave 3," highlighting the current position within the larger Elliott Wave pattern. Wave 3 is often the strongest and longest phase of the Elliott Wave cycle, representing a powerful surge in the direction of the dominant trend. The designated "POSITION" is "Blue wave 1," indicating the specific wave within the Elliott Wave hierarchy. Blue wave 1 represents the initial phase of the larger trend cycle and marks the beginning of a new impulsive move. In terms of "DIRECTION NEXT LOWER DEGREES," the analysis emphasizes "Red wave 4," suggesting the anticipated correction or consolidation phase following the completion of red wave 3. The "DETAILS" section notes that "red wave 2 of blue wave 1 looking completed at 0.60512. Now red wave 3 of blue wave 1 is in play." This indicates the conclusion of a corrective phase (red wave 2) and the commencement of the next impulsive move (red wave 3 of blue wave 1). The "Wave Cancel invalid level" is set at 0.60512. This level serves as a crucial reference point, beyond which the current wave count would be considered invalid. In summary, the NZDUSD Elliott Wave Analysis for the 4-hour chart on 26 February 24, suggests a continuation of the impulsive move, with red wave 3 of blue wave 1 in progress. Traders are advised to monitor the unfolding of red wave 3 and consider the invalidation level at 0.60512. Technical Analyst : Malik Awais      
    • Hi @JRF567, Unfortunately, we do not have an update on this yet. We will provide one once we have received feedback from the product team on the latest developments. Thanks, KoketsoIG
×
×
  • Create New...
us