Bitcoin’s Decline Suggests Fed’s Hawkish Policy Shift Is Priced In

A major risk reduction event has already taken place, leaving the door open for a classic “real buy” transaction following the Fed’s decision.

Bitcoin Market 15 dec 2021

 

Bitcoin seems to have swallowed the recent devaluation of the US Central Bank’s anti-inflation policy with a significant decline in recent weeks. Analysts say the cryptocurrency could see a bearish rally after the Fed’s decision on Wednesday.

Paulist expectations have risen following rising inflationary pressures and President Jerome Powell’s recent decision not to use the word “temporary” in discussions about inflation. Restrictive monetary policy is generally considered bearish (hedging inflation risk and emerging technologies) for assets, including Bitcoin. That said, there has already been a significant elimination of risk, leaving the door open for the classic “de facto purchase” or recovery of the relief caused by the long-awaited negative announcement.

As seen in the feature image, the bitcoin reached close to 69 69,000 on November 10, when the US Consumer Price Index (CPI) touched a three-decade high of 6.2% in October, but since then It has dropped by more than 30% since then. In November, the CPI reached a four-decade high of 6.8%. The dollar index, which tracks the value of the greenback against major currencies such as the euro, pound and yen, has risen more than 2% over the past few weeks, reaching a 16-month high of 96.93.

The two-year Treasury yield, which mimics short-term inflation and interest rate expectations, recently hit an 18-month high of 0.72%. Meanwhile, the Fed Funds Futures extended the period for the first interest rate hike to May 2022 and set a price target of at least three hikes for next year. Like this, The likelihood of a massive sell-off for the Fed’s announcement is relatively low unless the central bank signals more severe austerity than has been taken. Said Krueger, stock strategist at LMAX Digital. “It changes the balance of risk.”

 

Market Cap

 

Focus on peak rates:

With expectations of faster cuts and three interest rate hikes, the focus will be on the central bank’s high interest rate forecast. The consensus is that the forthcoming tight rate hike cycle will push interest rates higher than the 2.5% seen in the previous cycle from December 2015 to December 2018.

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