Bitcoin dip below $40K follows Fed signal of a possible fourth rate hike in 2022

Global
financial
markets,
stocks
and
cryptocurrencies
took
a
knock
on
Jan.
10
after
rumors
that
the
Federal
Reserve
may
hike
interest
rates
four
times
in
2022
circulated
and

sparked

a
sell-off
and
sent
the
benchmark
10-year
Treasury
yield

briefly
above
1.8%
.

Data
from

Cointelegraph
Markets
Pro

and

TradingView

shows
that
a
massive
wave
of
selling
broke
Bitcoin’s
(BTC)
support
near
$42,000,
resulting
in
a
plunge
to
$39,660
before
buyers
stepped
in
to
buy
the
perceived
dip.


BTC/USDT
1-day
chart.
Source:
TradingView

Here’s
what
analysts
are
saying
about
this
latest
drawdown
in
BTC
and
what
could
possibly
come
next
as
analysts
watch
to
see
what
the
impact
of
the
Fed’s
easy
money
policies
ending
means
for
risk-on
assets.

A
shrinking
money
supply
is
bad
for
Bitcoin

The
Fed’s
shifting
monetary
policy
is
generating
significant
challenges
for
risk-on
assets
but
this
was
anticipated
by
analysts
at
Delphi
Digital
who
noted
that
the
headwinds
facing
BTC
and
the
crypto
market
have
more
to
do
with
“tighter
liquidity
conditions
and
heightened
market
volatility”
than
with
rate
hikes.

According
to
Delphi
Digital,
“the
macro
tailwinds
that
helped
propel
BTC
and
crypto
assets
to
new
highs
over
the
last
12–18
months
have
reversed
course”
as
highlighted
in
the
following
chart
showing
that
the
global
M2
supply
topped
out
near
March
of
2021
and
has
been
on
the
decline
since
then.


Bitcoin
price
vs.
Global
M2
Supply.
Source:
Delphi
Digital

The
peak
in
M2
supply
came
around
the
same
time
that
Bitcoin
set
a
new
all-time
high
in
early
2021
and
was
followed
by
a
drawdown
below
$30,000
over
the
next
couple
of
months.

Despite
the
late
2021
resurgence
in
BTC
which
once
again
established
a
new
high
at
$68,789
in
November,
the
continued
drop
in
M2
supply
has
taken
its
toll
on
the
market,
which
has
been
exasperated
by
the
Fed
sharing
its
plan
to
accelerate
its
timeline
for
raising
interest
rates.

Delphi
Digital
said,

“The
shift
away
from
excess
liquidity
and
accommodative
monetary
conditions
is
a
structural
headwind
we’ve
highlighted
in
recent
months,
which
now
appears
to
be
coming
to
a
head.”

The
talk
of
higher
interest
rates
has
also
breathed
new
life
into
the
U.S.
dollar,
which
Delphi
Digital
noted
“does
little
favor
to
assets
like
BTC,
which
tends
to
move
inversely
with
USD.”


BTC/USD
vs.
DXY
Index
(Inverted).
Source:
Delphi
Digital

Delphi
Digital
said,

“We
continue
to
stress
how
important
the
U.S.
dollar
is
in
determining
the
direction
of
global
markets,
especially
assets
tethered
to
the
currency
debasement
narrative.”



Related:




Bitcoin
drops
below
$40K
for
first
time
in
3
months
as
fear
set
to
‘accelerate’

“A
good
buying
opportunity”

Analysis
on
the
current
chart
structure
for
BTC
was
offered
by
analyst
and
pseudonymous
Twitter
user
‘Resolute’
who
posted
the
following
chart
highlighting
the
42.5%
decrease
in
BTC
price
from
its
highs
in
November.


BTC/USDT
2-day
chart.
Source:
TradingView

Resolute
said,

“Conceivably
a
double
bottom
from
the
September
2020
low,
after
retracing
Q4s
move
up.
Currently
trading
below
the
2d
200
EMA,
which
has
historically
been
a
good
buying
opportunity.”

Resolute’s
observation
that
this
may
be
a
good
area
of
accumulation
was
echoed
by
cryptocurrency
trader
and
Cointelegraph
contributor
Michaël
van
de
Poppe,
who
posted
the
following
tweet
indicating
a
preference
for
opening
a
long
as
opposed
to
shorting
the
current
market.

The
overall
cryptocurrency
market
cap
now
stands
at
$1.192
trillion
and
Bitcoin’s
dominance
rate
is
40.9%.

The
views
and
opinions
expressed
here
are
solely
those
of
the
author
and
do
not
necessarily
reflect
the
views
of
Cointelegraph.com.
Every
investment
and
trading
move
involves
risk,
you
should
conduct
your
own
research
when
making
a
decision.

read original article here