Bitcoin (BTC) rose 5% on Nov. 10, returning confidence to the global macroeconomic outlook and the news that FTX has partially opened up for user withdrawals.
Cryptocurrency and stock markets reacted to consumer price index (CPI) data, with inflation at 0.4% for the month, up from 7.7% a year ago and down from expected monthly 0.6% and 7.9%. % increase. The news sent the Nasdaq higher. Up 6%, he’s on pace to hit his biggest daily profit since 2020.
After the volatility caused by the potential bankruptcy of FTX, the price of Bitcoin surged by $1,000 in minutes in response to the positive news of the start of withdrawals and positive stock movements.
Volatility may still be high amid the ongoing FTX situation, and while there is still a sense of waning doom among crypto commentators, some analysts believe the crypto market is still at a bottom. I don’t think I hit
The rest of the fourth quarter remains uncertain as some analysts expect 2022 to mimic the bear market of 2018. At the same time, there is hope that this bearish trend will disappear for him by early 2023.
The overall cryptocurrency market is positive, including Solana (SOL), which has risen 20% since November 9, even after losing 32.4% of its total value locked in the decentralized finance (DeFi) ecosystem.
Let’s examine the three major factors that influence the strength of the crypto market in the current environment.
Federal Reserve could turn the tide with rate hikes
When Cointelegraph reported on why the cryptocurrency market saw new losses last month, the US Federal Reserve was first on the list.
Concerns focused on an unwavering policy to keep the US dollar strong and interest rates soaring for the foreseeable future, a worst-case scenario for risk assets.
At the same time, rumors are gathering about the prospect of rate hikes as the Federal Reserve (Fed) has run out of room to act. After November’s 75 basis point rate hike, there are suspicions that policy will begin a U-turn, with smaller rate hikes in the months that follow before a full reversal in 2023.
So the signal that the Fed is preparing to soften its hawkish stance is being picked up by a market weary from a year of quantitative tightening (QT).
The Federal Open Market Committee (FOMC) in December is now expecting a rate hike of 50 basis points instead of 75 basis points, according to CME Group’s FedWatch tool.
The unemployment data released on Nov. 4 spurred confidence among the bulls. Higher than expected could mean that rate hikes are having the desired effect, and a pivot could happen sooner or later.
Bitcoin Volatility Hits Record Low
Analysis of data from Cointelegraph Markets Pro and TradingView reveals that BTC/USD has been quiet for far too long after hitting an annual low below $16,000.
This is especially noticeable in the Bollinger Bands volatility indicator.
Bitcoin’s volatility fell below that of some major fiat currencies last month, making BTC look more like a stablecoin than a risky asset.
However, analysts have long expected the trend to undergo a drastic change. And yes, the cryptocurrency market did not disappoint.
A look at Bitcoin’s Historical Volatility Index (BVOL) recently hit multi-year lows, suggesting that Bitcoin still has a way to give up this property.
“The volatility is so compressed and we are so conditioned as market participants that it’s very interesting that just a 3% move feels like a 15-20% move. said William Clemente, co-founder of cryptocurrency research firm Reflexivity Research. commented.
Dollar looks to a new chapter
After a sustained parabolic uptrend throughout 2022, the USD is just beginning to show bearish signs.
Related: Bitcoin seller exhaustion hits 4-year low in ‘classic’ bear market move
The US Dollar Index (DXY) recently reached its highest level since 2002, but more upward momentum could return at the expense of both risk assets and major currencies.
In the meantime, however, DXY has been under pressure and its decline has been in line with the return to form of Bitcoin and Altcoins.
This points to a problem that Bitcoin bulls hope to shake up: its continued strong correlation with traditional markets and its inverse correlation with the dollar.
“Bitcoin’s correlation with gold is now rising from 0 in mid-August to around 0.50,” said trading firm Barchart. clearly in October.
“Correlation is higher between $SPX (0.69) and $QQQ (0.72), but the correlation has declined recently.”
Fellow analyst Charles Edwards, founder of crypto asset management firm Caprior, noted that bitcoin macro price troughs are often accompanied by rising gold correlations.
Overall, analysts say the cryptocurrency market may still have another volatile day, but the positive news that FTX will resume withdrawals is providing a good upside.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. All investment and trading moves involve risk and you should conduct your own research before making any decision.