Will Bitcoin (BTC) See a Christmas Rally? Here’s what you should see

Following the recent speech by US Federal Reserve Chairman Jerome Powell, there were price fireworks in the stock market, which Bitcoin also benefited from. As a result, the BTC price has climbed to over $17,000.

At press time, Bitcoin was trading at $16,982. However, the joy could not last long. The price is currently bobbing at the level reached. Meanwhile, there are even signs of a slight downward trend again.

In the 1-hour chart, investors should keep an eye on four levels. A drop below $16,727 could mean an erosion of recent Powell gains. On the other side, a rise above the $17,250 level would clear the way towards the $17,800-$18,000 range.

Misinterpreted The Market Powell?

The reaction of the Bitcoin market is actually also logical. Since the last meeting, Fed officials have repeatedly defended the restrictive monetary policy and called for its continuation.

That Powell now said that “the time to moderate the pace of interest rate increases may come as soon as the December meeting” was a surprise. Nevertheless, the market overheard the hawkish comments.

Thus, Powell also said that the fight against inflation is far from over. Therefore, he said, the Fed must keep its policy at restrictive levels “for a while.”

Powell was also weary of stressing that the Fed still has a long way to go to bring down inflation, and that they likely need “somewhat higher” interest rates than expected in the September projections.

Golden animal Peter Schiff commented:

Investors are no longer buying what Powell is selling. Today he was as hawkish as ever, but the dollar fell, and gold and stocks rose. Powell’s willingness to fight #inflation is contingent on a soft landing. Not only will the economy crash, there will be another financial crisis.

Bitcoin faces headwinds in December

Whether or not there will be a Christmas rally in December will likely depend on various factors that will confront Bitcoin with serious headwinds.

First and foremost, the Fed meeting on 14 December and the release of the new CPI data a day earlier will probably be the key to deciding whether it will be a green or red Christmas.

Additionally, Bitcoin investors should keep an eye on additional FTX contagion effects, particularly Genesis Trading and DCG. If DCG actually just has a liquidity problem and can solve it, it will be a huge relief to the crypto market.

Recession fears are also growing, but may take a back seat for now if inflation continues to fall and the Fed announces a 50 bps rate hike. Potentially, this will be solid fuel for a strong year-end rally.

With miner capitulation currently looming, Bitcoin may enter the final phase of its bear market. The historical average duration is 14 months. We are currently in our 13th month.

A Glimpse Beyond December – Bitcoin’s First Recession?

Not only Peter Schiff, but also other analysts are still warning of a looming recession, although Powell still called a soft landing “very plausible” during his last speech.

That the full effect of the Fed’s policy will not show until 2023 is also supported by the fact that the earnings results for the fourth quarter, due at the end of January, are always the strongest of the year.

It may therefore happen that a recession will not become visible until April 2023, when the earnings for the first quarter of 2023 are announced.

A CryptoQuant verified analyst noted that the 2YR-10YR yield curve has the steepest inversion since the 2000s (dot com bubble). Over the past 2 cycles, other inversions have caused a roughly 50% correction in the S&P 500.

“The theoretical bottom of a similar correction would be the Covid low for the SPX – 34% downside from here,” he said, continuing:

If this happens, it will be Bitcoin’s first true recession. Surviving it will forever solidify BTC as an investable macro asset. […] it also means that BTC prices can stay down for longer than the typical 3-month cycle lows.