Dreams of a green Christmas for BTC have been dampened after a disappointing November close.
The world’s largest cryptocurrency finished Nov. at $57,005 — well short of what analysts was hoping for.
The market activity was punctuated after a sharp rejection from $59,000.
That came after the Fed chairman Jerome Powell recommended measures designed to help stimulate the economy during the Covid-19 pandemic might end even earlier than thought.
The central bank’s quantitative easing program — which involves creating new money and pumping it into the economy — has been a main factor in BTC’s rally over the past one and a half years.
But even as the new Omicron strain of COVID causes alarm, Powell points to high levels of inflation as the bigger issue of concern.
Inflation gauges price increases customers pay for services and goods— and although the Fed has long had a goal of 2% in place, Oct.’s reading came in at 6.2%.
The Fed had previously tried to play down the recent spike as “transitory,” but Powell has now admitted that inflation might remain overheated until the second part of next year. He added:
“I think it is probably a great time to retire that word.”
While too much inflation could greatly reduce the spending power of the money in your pocket, it has helped increase demand for BTC. The cryptos fixed supply of 21 million means it has been regarded as a hedge against inflation for a while now — a store of value.
Dec. is going to be important for the markets and for the global economy.
Scientists are now rushing to learn more about the Omicron strain. The main questions include whether it is easier to transmit than previous variants of COVID-19, whether it could cause more severe illness, and whether it’s more resistant to vaccines. It might take weeks to get the answers.
Pres. Joe Biden has described Omicron as a “cause for concern, but not a cause for panic” — and stressed that lockdowns aren’t currently necessary. And while Powell stated the strain could bring fresh uncertainty, he does not think its effects on the economy will be “remotely comparable” to Covid did in March 2020.
The Fed will release updates to its policies two weeks from today, delivering confirmation on whether stimulus will be brought down faster, and possibly hinting on when interest rates could be increased. Both events might prove bearish for the cryptocurrency markets and stocks alike.
And this brings us back to BTC, where enthusiastic investors are hoping to emulate the dramatic price spikes that we saw in 2013 and 2017.
November’s close of $57,000 was less than the “worst-case scenario” expected by the popular cryptocurrency analyst PlanB, who had predicted Bitcoin would currently be valued at $98,000.
This came after his floor model had “nailed” the closing prices in Aug., Sept. and Oct. On Twitter, he wrote:
“No model is perfect, but this is a huge miss and the first in a decade!”
PlanB went on to openly question whether Nov.’s tepid performance was an outlier or a black swan — and stated he planned on giving his floor model “30 more days” to find out.
Brent Donnelly recently told the Reuters media agency:
“There should be more agnostics that focus on the fact we’re in a bad part of the cycle for cryptocurrency here — the corrections might be epic. Be positive you can survive the winter.”
Author: Blake Ambrose