Robert Steinadler, 8 months ago

The Fed raised the rates again – Bitcoin remains neutral

Yesterday the latest FOMC meeting ended with a press conference and good news. According to the CME Fed Watch Tool, there was an 18 % chance that the Fed is going to opt for a 100 bps rate hike. This time Jerome Powell did not “pow” the market and gave a press conference that revealed moderation, but also reminded everybody that the Fed is going to continue with its course.

Why is the Bitcoin price flat and when will this bear market most likely end?

Let’s raise some rates

A 75 bps rate hike was expected and was delivered. Powell reiterated during his short speech that the Fed is committed to bringing inflation down. It is the Fed’s priority to fight inflation and currently, there are no other tools available than raising the rates and quantitative tightening. Other factors like the war in Ukraine and the high oil price are also contributing to the problem, but cannot be fixed by the Fed.

The recent press conference revealed that the Fed is going to continue with its course. This means that the tide won’t turn for a longer period of time. The goal is clear, bring down inflation to 2 % and do whatever it takes to get there without crashing the markets in a heartbeat.

When will Bitcoin and crypto recover?

There is a strong correlation between stocks and crypto which means that as long as this correlation is in place, Bitcoin will most likely recover when stocks will. The only alternative is to break free from correlation.

So, if we assume that the crypto won’t break free from that correlation, the most likely moment for a bottom and a turnaround is when the Fed announces that its goals have changed or if we are getting closer to 2 % inflation. While the last press conference with Jerome Powell wasn’t too bearish, we are far from getting bullish again.

Powell made clear that the Fed is far away from changing its course. It is this statement that reveals that the rest of 2022 won’t be bullish at all for most of the stock market.

There is light at the end of the tunnel

It is important to keep in mind how much of an opportunity is created this year. A war in Europe, an energy crisis, supply chains getting crushed, Covid is not over yet, we could continue this list for a while. The thing is, Bitcoin is still worth around 19.000 US-Dollar and Ethereum about 1.300 US-Dollar.

How would this market look if it weren’t for all those critical events? Nasdaq is preparing for crypto. Blackrock basically opened up a trading desk for institutional investors. The regulation allows crypto-related businesses to grow in the US and Europe and to operate with certainty about rules and in full compliance.

It might take a long time until we finally get to the promised land and see a recovery throughout the market. There has probably never been a situation where so much opportunity was created like in the bear market of 2022.

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