The elf came early in crypto? The Bitcoin Rally May Have Passed
Bitcoin saw positive price action recently but failed to follow through and may remain capped in December. The cryptocurrency rallied from a new annual low of $15,500 and market participants expected further gains, but the market has stalled.
As of this writing, Bitcoin is hovering between $16,900 and $17,100. The cryptocurrency is still maintaining gains from last week, but today’s trading session is more to the downside.
No Christmas Miracle for Bitcoin?
In a recent market update, trading desk QCP Capital highlighted the positive performance of Bitcoin and Ethereum in December. These digital assets have followed the stock market closely.
The firm believes shares have shown strength on the back of a potential US central bank (Fed). The financial institution hinted at moderating monetary policy and reducing the rate hike program.
This potential change sparked “strong” bullish momentum for the stock market, allowing Bitcoin and Ethereum to rise 13% and 22% over the past two weeks. Despite the collapse of FTX in November and fears of contagion, the value is almost back to October levels.
In this context, market participants have been quick to call the end of the bear market, but QCP Capital argues that there are reasons to maintain a bearish bias. For example, robust economic data from the US could support the Fed to continue its tightening policy.
QCP Capital stated the following regarding the current price action in the old financial market and its impact on the crypto market:
While many say that BTC and ETH are lagging stocks and should catch up, we rather see that stocks have exceeded fundamentals and will soon pull back.
Thus, the possibilities of the stock market pushing down on Bitcoin and Ethereum are large. There are indications of possible downside pressure for stocks, crypto and asset risks.
Analyst Caleb Franzen pointed to the VIX index; an indicator used to measure volatility in legacy financial markets. This calculation has provided a solid strategy for risk asset buyers in 2022. The analyst said:
CBOE Market Volatility Index #VIX fell below 20 last week but has launched higher today! As I have shared since August, the top strategy for 2022 has been:
• Buy risky assets when $VIX > 30
• Sell risky assets when $VIX < 20
Regardless of the bullish expectations, the crypto market may see more selling pressure in the coming weeks. This month’s Federal Open Market Committee (FOMC) will shed more light on the direction of the macroeconomic landscape and the landscape for risk assets, such as Bitcoin.
