Bitcoin Hits $17,000, But Is It Too Early To Call The All Clear?
Bitcoin is recovering the losses of the last few weeks and it is in the process of regaining the support lost during the FTX debacle. The number one crypto by market cap is showing some near-term strength as macroeconomic conditions continue to improve.
Other cryptocurrencies in the crypto top 10 by market capitalization see profits. Dogecoin (DOGE) and Ethereum (ETH) lead the rally with double-digit gains last week. As of this writing, Bitcoin is moving sideways between $16,900 and $17,000 and adjacent levels.
Bitcoin is up, is the market over?
Yesterday, US central bank (Fed) chairman Jerome Powell hinted at moderating monetary policy. The financial institution has increased interest rate increases to curb inflation.
The market is feeling the effects of the Fed’s policy. Unemployment rates are rising, the US economy is slowing, and commodities are maintaining their bearish trajectory, but most importantly, the real estate sector took some massive damage.
Recent data indicates that US home sales are experiencing their worst period in decades. These data suggest lower inflation, but could spell trouble for this country’s economy. If the Fed fails to act, the US could enter a recession.
Buyers evaporating due to interest rate hikes and new 30 year cost shock of over double from 1 year ago for monthly payment amt. Owners do not take note or are less likely to do so. Other owners who are sitting on high 2 or 3% mortgages will never move. Both supply and demand are falling, who wins?
— Evan Kirkpatrick (@evankirkpatrick) 1 December 2022
The Fed may be willing to focus on its monetary policy in this context, thereby allowing Bitcoin and risk assets to increase and increase their bullish momentum. Macro director for the investment company Fidelity Jurrien Timmer mean it may be too early to call a victory.
The experts claim many other factors to consider before calling the bottom. In stocks, a sector closely followed by Bitcoin, the next few earnings seasons will be crucial.
Companies must show growth early next year, otherwise the stock market risks another blow. So far, Timmer believes that the chances of significant growth are “unlikely” as measured by the Purchasing Managers’ Index (PMI).
This index measures the state of the manufacturing and service sectors. The calculation provides an overview of the current and future health of companies. The diagram below shows that the calculation has room to keep crashing.
Based on the PMI cycle, the market may see an effective relief in 2024, which coincides with the Bitcoin Halving. This event is a major bullish catalyst for Bitcoin. Timmer said:
(…) It seems premature to expect a bottom in earnings anytime soon. If earnings growth will not bottom out for a year or longer, a price bottom in October seems quite ambitious.
However, Timmer also clarified that there is a precedent where shares rose before a good earnings season. The market experienced these rallies in the 1970s and 1990s, but as mentioned, this possibility is unlikely in today’s environment.
Of course, in our current cycle earnings growth peaked along with price, so the market can follow a more conventional playbook rather than repeating the hopeful outlier of the early 1970s. /END
— Jurrien Timmer (@TimmerFidelity) 1 December 2022
