Finding Bitcoin’s True Pain Point, Why Less Than $30K Seems Likely
Bitcoin is maintaining its bullish short-term trajectory to the US Federal Reserve FOMC meeting, suggesting that the downtrend could lose momentum. BTC investors have felt the pain in recent weeks as the cryptocurrency shows a high correlation with the US stock market.
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At the time of writing, BTC is trading at $38,301 with a gain of 2.3% in 24 hours.
BTC with moderate gains in the 4-hour chart. Source: BTCUSD trading summary
Facts presented by Joe Orsini, research director for Eaglebrook advisors, Bitcoin has historically had a positive performance in terms of percentage on FOMC announcement days. As can be seen below, current FED chairman Jerome Powell’s administration has pushed the price of BTC up as much as 20% in these days.
Source: Joe Orsini via Twitter
In addition, the chart shows that the BTC percentage change in the daily chart during these events tends to be moderate. Probably because of the market already pricing in possible announcements.
With the exception of April 2020, every FOMC meeting is followed by moderate price swings on these timeframes, with the largest downward change near 5%. If Bitcoin stays on its current trend, it could score another bullish post FOMC trading day.
However, when Bitcoin’s current decline is compared to April 2020 and July 2021, BTC appears poised for further losses. In recent periods, BTC fell below 60% and 50% before a significant price reversal occurred.
Source: Teddy Vallee via Twitter
On the contrary, it only recovered briefly when it did not fall below the above percentage. This suggests more downside after a dead cat likely bounces to the $40,000 area.
Bears Ready Ammunition? Bitcoin responds to macro factors
During the current price action, investment company QCP Capital has: seen an increase in selling pressure for the spot market. In addition, short-term option contracts have experienced “aggressive buying” as large investors hedge their positions.
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QCP Capital has seen increased confidence in the market as BTC recovers, but the company is “not sure” whether the market has seen the lows and will resume its full-blown bullish trend. The company compared the change in At-the-money option volumes for BTC and ETH when the price crashed in May 2021 and today.
10/ While the front end peaked full hard with BTC 1 week from 70% to 100% and ETH 1 week from 85% to over 120%, the longer end of the vol curve remained relatively tame. The curve rose just 5-6% from March to a very modest 75% level. pic.twitter.com/f2smBbl4dB
— QCP Capital (@QCPCapital) January 26, 2022
At that point, the stat registered a spike of up to 250% for ETH, while current volumes remained “relatively tame.” In other words, the options sector seems to suggest that BTC could have more blood. The company added:
Does this mean the market has yet to hit its real pain point? Below the 30,000 level in BTC maybe? Much of the near-term price action will depend on the Fed’s statement later today (…). Given the bloodshed in stocks, there’s a good chance we’ll get a fairly neutral statement and mkt will use that as an excuse to recover. A short squeeze across the board is likely.