If 2022 is not over yet, we can already announce that the year will not be a great vintage for the crypto market. For Bitcoin in relation to the market as a whole, the coming week could be crucial. The MisterSpred trader even talks about this week as the most important of the year. A formula that has caught many observers. In any case, this new week could be marked by a return of volatility. Here’s why the 5 things to follow this week.
US inflation figures
This is the big macro event of the week. The will be published tomorrow US inflation figures. Declining over the past several months, these figures are critical. And it is important that the decline continues. When the October figures were published, the inflation rate over 12 months was 7.7%. Throughout November, the markets expect the decline to continue to 7.6%.
If these figures are particularly important, it is because of them that it depends the Fed’s monetary policy adjustment. And this December, the deadlines are very close. Because the publication of the figures on inflation will be a response to the meeting of the FED scheduled for the following day. A meeting during which the entity led by Jérôme Powell will decide on a new rate increase.
At the last FOMC meeting, key interest rates rose 50 basis points after 4 consecutive increases of 75 basis points. For tomorrow, the markets therefore expect the rise to be limited to 50 basis points as well. In any case, this is the hypothesis to defend at 72.3% of the economic players surveyedas the diagram below indicates:
If the markets are expecting a further increase of 50 basis points, it is nevertheless interesting to note that the percentage is falling. A month ago, it reached 80%. The trading company QCP Capital even talks about publishing these figures as:
The largest ever consumer price index release.
volatility, but in what sense?
For most observers, this week is clearly going to be volatile for Bitcoin. But also for the entire crypto market. However, many do not seem to agree with the direction that the mother of cryptocurrencies could take.
According to Matthew Dixon, CEO of the Evai platform, Bitcoin should reverse the losses suffered by the fall of FTX in the short and medium term. And get a de facto level close to 20,000 dollars. Other market fans believe that Bitcoin could continue its slide all the way to the $10,000 threshold.
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The US dollar is picking up again!
According to crypto trader Bluntz, this element could also affect the price of Bitcoin by the end of the year. To defend his point, the trader states the US dollar index (DXY), an index that compares the value of the US dollar to a basket of foreign currencies. When the index rises, it means that the US dollar is gaining strength against other currencies. And we are in this situation right now.
Good to know: The DXY index compares the dollar and 6 different currencies to which different weightings are applied: euro (57.6% of the index weight), Japanese yen (13.6%), pound sterling (11.9%), Canadian dollar (9.1%), Swedish krone (4.2%) and the franc Switzerland (3.6%). We also sometimes hear the term “basket of currencies of US trading partners.
For the crypto market, the recovery of the dollar is not necessarily good news. In a recent post, the crypto trader with more than 200,000 followers on Twitter stated his short-term forecast for Bitcoin:
My gut tells me we are on our way to a new low under $15,000 for BTC, which I will happily buy.
In another post, he mentioned that this threshold could be reached in the first quarter of 2023. Profit Doctor Trader also mentions this DXY indicator. Noting that it had now entered a key zone and that short-term signals were likely to be decisive in establishing a longer-term trend:
The mother of all decisions is coming, expect massive volatility next week. The movement of the DXY will determine the fate of the crypto and the stock market. The DXY has yet to recover its 200-day moving average (MA). However, the loss was recently described as “lights out” for the US dollar.
The ISSR ratio at its height!
To understand the evolution of the Bitcoin price in the coming days, it will also be necessary to look at the ISSR ratio (Illiquid Supply Shock Ratio). This measures the illiquidity around Bitcoin, ie the proportion of BTC tokens that their owners withdraw from their sale. A feature that helps to create stronger buying pressures since the selling offer has decreased.
Good to know: This indicator was created by statistician Willy Woo and cryptocurrency researcher William Clemente. The purpose of this indicator is to model the probability of a supply shock.
To make it simple, when the ISSR is high, it tends to be positive for the price of Bitcoin. It is still essential that the number of exchanges continues to be at the rendezvous. Yesterday, this indicator reached a level it has not reached since August 2014. The coming days could be decisive to see if the trend continues.
BTC sales by miners
In the equation and determine the price of Bitcoin, we often hear that the role of miners is still central. Fear or fear enough that the market would be flooded with new Bitcoin by miners eager to stay afloat.
An opinion that former BitMEX CEO Arthur Hayes doesn’t necessarily seem to share. In a blog post published this weekend, the former leader made a point of clarifying the substance of his thinking by qualifying the role that miners play in Bitcoin’s price.
Even if miners sold all the Bitcoins they produce every day, it would have a small impact on the markets.
According to Hayes, the market therefore has plenty of capacity to absorb this potential selling pressure. Recall that since the last half of Bitcoin of 2020, miners he is awarded 6.25 BTC per mined block. Considering a new block every 10 minutes, this is equivalent to 900 new Bitcoins every day. At the current BTC price, that’s over $15 million. Very thin compared to the amount of daily sales that often exceeds 15 billion dollars.
Furthermore, Hayes estimates that most of the sales to minors had probably already been made. A belief that seems to be confirmed by data from Glassnode which shows that the variation in supply (over 30 days rolling) from miners is decreasing. In response to Hayes’ article, other observers also added their insights. This is particularly the case for Jaran Mellerud who believes that the fear of pressure from miners to sell is largely overestimated.