YEREVAN (CoinChapter.com) – Bitcoin registered a 5% uptick since Dec 12, hitting a monthly high of $17,300 on Dec 14. The uptick started ahead of the Fed meeting that discussed the latest CPI report. However, despite the favorable cues from the subsiding inflation, the flagship crypto could pair its gains, dropping to approximately $15,000 amid the Binance FUD. Here’s why.
Bitcoin faced bearish technicals
The leading digital asset formed a setup named the ‘rising wedge,’ best visible on the four-hour chart. It entails two converging trendlines that drove the BTC value incrementally higher while lowering the price swing.
Despite the price increase, the rising wedge is a bearish reversal pattern and forecasts a drop ahead, equal to the maximal formation height. Notably, BTC broke the wedge to the upside, rising above the resistance on Dec 13.
BTC might return to the rising wedge
However, the buying pressure might fizzle out shortly, forcing BTC/USD exchange rate to fall back into the setup. If so, the target price for Bitcoin would stand at $15,000, or 13% lower than the current value.
Meanwhile, bearish technicals alone are not enough to make a solid prediction. Thus, the installation of macro factors, including the Fed Meeting and the Binance FUD, should be taken into account and discussed in more detail.
As CoinChapter mentioned in the previous Binance review, the exchange and its chief, Changpeng Zhao (CZ), could face criminal charges. The news erupted on Dec 12, creating a FUD that resulted in a record withdrawal spree that amounted to approximately $5 billion in 24 hours.
CZ commented that he did not think the FUD had any solid ground to stand on. Moreover, the CEO tweeted that he found the hype “annoying.”
FUD helps us grow, even though they are thoroughly annoying. You can FUD about someone without explicitly mentioning their name, which spreads awareness. It also helps unite their supporters because it forms a common defense alliance.
Admittedly, the Binance FUD could substantially hurt the crypto industry as a whole. However, not before giving Bitcoin a short-term nudge to the upside. According to estimations from the analytical platform Glassnode, nearly 40,000 BTC left Binance on Dec 13, an equivalent of approximately $690 million.
The Bitcoin bank run continues.
Moreover, the exodus continued on Dec 14, with exchange withdrawals rising alongside the Bitcoin supply in self-custody. In its weekly report, Glassnode noted that the long-term holder ‘treasury’ had reached an all-time high of 13.9 million BTC.
Thus, the Binance FUD could help the Bitcoin price in the short term, creating a supply squeeze. Moreover, an outflow from exchanges is generally a bullish sign, as traders prefer to hold on to their crypto instead of selling it.
Senior analyst at UTXOmgmt Dylan LeClair also asserted his support for self-custody wallets, saying that a solvent exchange would not face problems even when confronted with ubiquitous withdrawals.
Run the exchanges and the frauds will fail, while legitimate actors will remain. […] The only form of proof of reserves that matters is a successful withdrawal to self-custody. Everything else is noise. It’s healthy, and anyone who says otherwise is either ignorant or has an agenda.
As CoinChapter reported earlier, the Bureau of Labor Statistics published its latest report on Dec 13, containing inflation data for November 2022, which stood at 7.1% year-over-year, slightly below estimations. Depending on the consumer price index (CPI) statistics, investors typically look to the Fed to determine the appropriate interest rate hikes to curb rising inflation.
Generally, Fed’s hawkish policies mean tougher borrowing terms and higher interest rates for consumers and businesses. They are designed to slow down the economy, subside consumption, and, by extension, inflation. Conversely, a slowdown in hawkish policies means faster growth and a bullish phase for the stock market.
The Fed Chair Jerome Powell is scheduled to appear at a press conference on Dec 14, 14:30 ET, to discuss the said policies. The Central Bank is poised to moderate its aggressive tightening while signaling that interest rates will ultimately go higher than previously forecast.
If the Fed announces a more dovish approach ahead, investors might double down on stocks to hedge their funds. Thus, given the correlation between risk-on assets and Bitcoin, the latter could also enjoy a proxy rally. Additionally, the flagship crypto has been flashing possible reversal signs throughout the previous two months, solidifying bullish expectations.
However, the inflation is still over three times higher than the healthy 2%, which means Bitcoin investors should proceed with caution. David Page, head of macroeconomic research at AXA Investment Managers, agreed, saying the tamed CPI makes Powell’s job “even harder.”
We’re already seeing an easing coming through in bond yields on the narrative the Fed is going to turn quite quickly. That doesn’t help the Fed manage the short-term run. … The more markets move, it might mean the Fed has to work harder to convince the markets there’s more to be done.
Bitcoin is an asset with a market cap of over $340 billion that depends on various economic and political factors. The current outflow from exchanges, brought on by the Binance controversy, could help the BTC price in the short term. However, the far-reaching implications could still tumble the flagship crytpo.
Additionally, the Fed’s interest rate hikes play a key role in regulating the stock market and, by proxy, other risk-on assets such as cryptocurrencies. While the previous hikes might have tamed the runaway inflation, it still has a long way to fall. Thus, current and potential Bitcoin investors should exercise caution.
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Lilit is a Yerevan-based Markets writer, skilled in 3 languages, and interested in writing about the tech world, trading, art, and science. She also has a background in psychology and marketing, which helps deliver the right message to the target audience.