Why Bitcoin Will Crush Resistance at $21,000, Green November Likely
Bitcoin is hanging below resistance at $21,000 and could be preparing for another leg to the upside in the coming days. The cryptocurrency broke out of a range last week, trending higher and reclaiming previously lost territory.
At the time of writing, Bitcoin (BTC) is trading at $20,300 with sideways movement over the past 24 hours and a 6% gain over the previous days. This week could bring more volatility to the market with the US releasing new economic data.
Fed Pivot Takes Shape, Bitcoin Likely to Benefit
According to a recent market update from trading firm QCP Capital, the crypto market enjoyed “much-needed positivity.” There has been much speculation about the reasons for the upside of the short-term trend, but macroeconomic conditions are the most likely cause.
The US central bank (Fed) is raising interest rates to curb inflation, and this monetary policy is wreaking havoc across global markets. As a result, the US dollar has seen its highest levels in 20 years as investors seek shelter amid economic uncertainty.
In this environment, nothing but the US dollar thrived; other assets, including Bitcoin and gold, and currencies, particularly the euro, Japanese yen and British pound, have suffered losses. In that sense, the Fed is between a sword and a hard place.
The financial institution can continue to wander and tighten monetary conditions, but the pressure from America’s allies and elected officials is proving to be challenging. The market has begun to price in a dovish Fed, according to QCP Capital, which lends support to the Fed’s pivot narrative.
This paper is bullish on Bitcoin and risk assets and considers a shift in the Fed’s monetary policy to bring some relief to the market. The trading firm registers a decrease in the possibility of another increase of 75 basis points for December.
A new narrative to save BTC?
The possibility of the Fed’s 75 bps hike fell from 55% to 45% and may continue to decline due to internal and external pressures. Recent reports show that the Fed itself is facing the consequences of the current economic landscape.
The Fed runs an operating deficit because it pays more to banks and mutual funds in interest than it earns on its securities portfolio.
The central bank, which sends all profits to the treasury, can create an IOU so that the loss does not affect operations.
— Nick Timiraos (@NickTimiraos) 31 October 2022
QCP Capital wrote:
Other central banks globally have already started to show prowess with the BoC the first to raise +50bps (versus +75bps expected) and the ECB easing their guidance, suggesting they are nearing the end of the hike cycle earlier than expected.
However, traders should be wary of overly bullish sentiments. Bitcoin remains susceptible to macro forces in the near term, and the crypto market could react negatively to a “continued hawkishness from the Fed,” QCP Capital concluded.
