Bitcoin’s strong correlation to ‘Dr. Copper becomes healthier; Bitcoin Seesaws Back to $17.8K
Good morning. Here’s what happens:
Prices: Bitcoin rose early but later fell after Federal Reserve Chairman Jerome Powell dampened enthusiasm stemming from a less aggressive rate hike with hawkish comments.
Insight: Is Dr. Copper’s recent rise a positive sign for bitcoin?
Prices
CoinDesk Market Index (CMI)
882.47
−3.1 ▼ 0.4%
Bitcoin (BTC)
$17,811
+32.7 ▲ 0.2%
Ethereum (ETH)
$1308
-13.3 ▼ 1.0%
S&P 500 daily close
3,995.32
-24.3 ▼ 0.6%
Gold
$1819
+5.2 ▲ 0.3%
Treasury Yield 10 years
3.5%
▲ 0.0
BTC/ETH prices per CoinDesk indices; gold is the COMEX spot price. Prices from approximately 4:00 PM ET
Bitcoin seesaws but holds at $17.8K
By James Rubin
Bitcoin looked set to continue its momentum this week before US Federal Reserve Chairman Jerome Powell dampened investors’ spirits with a pointed reminder that the Fed was not done with its monetary hawkishness, even after lowering its latest rate hike to 50 basis points.
The largest cryptocurrency by market capitalization recently traded at $17,811, roughly where it stood 24 hours earlier. BTC had topped $18,300 earlier in the day following an unexpected decline in November inflation data and the Fed’s expected dovish turn. But at a news conference after the Federal Open Market Committee (FOMC) announcement, Powell returned to a months-long theme that rising prices posed the biggest threat to the economy.
“50 basis points is still a historically large increase, and we still have some way to go,” Powell said at a news conference after the FOMC statement.
Ether followed a similar pattern, rising earlier in the day before falling to trade at $1,308, down about a percentage point from the same time on Tuesday. Most other major cryptocurrencies were in the red, though not as much with UNI, the symbol of decentralized exchange Uniswap, and LINK, the symbol of software platform Chainlink, falling 3.2% and 3.1% respectively.
The CoinDesk Market Index (CDI), an index that measures crypto’s performance, recently dropped 0.33%.
Stock indexes hurt by Powell’s comments closed down with the tech-heavy Nasdaq and S&P 500 down 0.8% and 0.5%, respectively. Tuesday’s consumer price index fell to 7.1%, lower than the 7.3% forecast by economists responding to a FactSet survey.
The Fed’s latest rate hike raises the federal funds target range to 4.25%-4.5%, the highest level in 15 years. Powell has signaled that the terminal rate – the top rate for the current hiking cycle, expected sometime next year – is likely to be above 5%. The federal funds rate is the interest rate that banks charge each other to borrow and lend money.
Meanwhile, US Senators Elizabeth Warren (D-Mass.) and Roger Marshall (R-Kan.) are introducing a bill to crack down on money laundering and the financing of terrorists and rogue nations via cryptocurrency. The Digital Asset Anti-Money Laundering Act would bring know-your-customer (KYC) rules to crypto participants such as wallet providers and miners and ban financial institutions from trading digital asset mixers, which are tools designed to hide the origin of funds.
Edward Moya, senior market analyst at forex market maker Oanda, noted in an email that the current Congress, which is in its final weeks, is unlikely to pass the legislation, but that “the law will address some national security concerns as it requires crypto firms to play by those the same rules that apply to banks and traditional firms.”
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Insight
‘Dr. Copper’ provides encouragement for Bitcoin investors
By Glenn Williams Jr.
Bitcoin’s correlation with copper, which moved into positive territory after Thanksgiving, has continued to rise.
The increase is significant, given copper’s traditional link to economic health. Analysts often look to copper as a proxy for growth, affectionately calling it “Dr. Copper” for its professorial ability to predict trends. So good copper bodes well for the economy, which bodes well for bitcoin.
The markets have taken a positive view of copper, with the price of the futures contract up 8% over the past three weeks. If historical conditions hold true, this trend would suggest market confidence about the US economic outlook.
In contrast, bitcoin (BTC) has maintained a strong negative correlation with the US Dollar Index (DXY). Investors will be watching this index in the coming weeks, especially after the Fed’s Federal Open Market Committee (FOMC) cut interest rate hikes to 50 basis points on Wednesday from its earlier, more aggressive 75 bps increases.
Still, Fed Chair Jerome Powell was unexpectedly hawkish in his comments after the rate announcement, reiterating long-held concerns about inflation.
Will bitcoin follow Dr. Copper’s prescription or follow the lead of the US Dollar Index? The coming weeks will be exciting to watch.
Important events
08:30 HKT/SGT(00:30 UTC) Australia unemployment rate said (Nov)
10:00 HKT/SGT (2:00 UTC) China retail sales (year/Nov)
21:15 HKT/SGT (13:15 UTC) The European Central Bank’s monetary policy decision
CoinDesk TV
In case you missed it, here’s the latest episode of “First Mover” on CoinDesk TV:
FTX founder Sam Bankman-Fried refused bail; Bitcoin Rises Ahead of Key Fed Decision
While Sam Bankman-Fried is in custody after a Bahamian judge ruled that he should be denied bail, the US Senate Banking Committee had its turn to question witnesses about the FTX collapse. Rep. Ritchie Torres (DN.Y.) joined “First Mover” to discuss the latest developments and his recent legislation targeting crypto exchanges. Matt Stoller from the American Economic Liberties Project also joined. Additionally, 3IQ’s Mark Connors shared his outlook for the crypto markets ahead of today’s highly anticipated Federal Reserve decision on interest rates.
Headings
Binance CEO Changpeng ‘CZ’ Zhao warns employees of turbulent times: “Although we expect the next few months to be bumpy, we will get past this challenging period,” CZ said assuring that the organization is built to last.
Citi says crypto market leverage, open interest is historically low: The bank expects a broader focus on decentralization in 2023 after this year’s failure in centralized crypto ventures.
Indian crypto traffic took a dive as tax regime tightened: The government’s two taxes have curtailed the use of Indian crypto platforms, although interest in Binance has remained steady because that exchange is outside the country’s jurisdiction.
US Senators Warren, Marshall Introduce Anti-Money Laundering Digital Assets Act: The proposal would bring know-your-customer rules to crypto participants such as wallet providers and miners.
US Senate FTX Hearing Reveals Congress Has No Immediate Answers: As the crypto industry’s epic disaster continues to unfold with a criminal case and regulatory actions, US senators found no clear path forward during a Wednesday hearing.
