Bitcoin Falls After Fed Pauses Rate Hikes
This report covers:
The Fed paused rate hikes—what it means for markets
My Bitcoin price outlook and the bottom signals I’m waiting for
How the latest regulatory attacks on crypto may impact price
TLDR (my game plan): I’m only interested in buying Bitcoin at extreme levels—a break out above $35K or a crash down to $17K.
Read time: 4 minutes
1. Today’s FOMC Meeting Recap
For the first time in 15 months, and after 10 consecutive rate increases, the Fed did not raise rates.
However, Powell said they will continue fighting to get inflation down to 2%. Interest rate traders are not expecting the Fed to lower rates until next year:
Lower interest rates should be bullish for crypto and stocks long-term. Stocks ended up small for the day, but crypto has been selling off after the market closed. Let’s take a closer look.
2. Bitcoin Price Outlook
Bitcoin’s last weekly candle closed below the 200-week moving average (blue line). That was a bearish signal.
Selling is now accelerating after today’s FOMC meeting.
The horizontal white lines represent levels where Bitcoin could find support and resume rallying. However, I’m not interested in buying there.
I’m only interested in buying if it goes all the way down to $17-19K. I don’t think it’s likely that Bitcoin will go that low, but I’ll be looking for longs if it does.
In terms of buying strength, I could make the case for buying if Bitcoin gets back above the 200-week moving average. However, I’d rather wait for extreme strength. I’ll be interested in buying Bitcoin if it breaks out above resistance at around $35K.
Crypto’s potential upside vs its risk seems less favorable now than in the past because there was more upside before. For now, I’d rather spend my time on tech stocks. I’ll share what I’m doing there in future reports.
Is the Market Being Manipulated?
Volume and order book depth on exchanges is down to levels not seen since 2020 as traders and market makers leave US exchanges because of the SEC’s threats.
Illiquidity make it easier for prices to be influenced. Therefore, I don’t trust that moves in either direction are meaningful signals.
Bottom Signals
I’m waiting for more crypto natives to capitulate and leave the space—like they did after FTX collapsed—before I get super bullish again.
Here are a few more bottom signals I'm waiting for:
"Crypto is Dead" stories all over the news
Elizabeth Warren’s “anti-crypto army” takes a "victory" lap press and social media tour
No more shitcoin shilling on Crypto Twitter
Crypto native consensus is that the bear market is going to continue for longer
Normie sentiment is bad enough already, but crypto native sentiment isn’t bearish enough yet for me to get bullish.
3. The Regulatory Assault Rages On
The SEC’s assault on the crypto industry has come to a head:
US policymakers have pushed investors out of onshore, regulated stablecoins—and into offshore, unregulated stablecoins
a16z crypto is moving offshore and getting support from the UK to do so
Exchange volume is moving from regulated exchanges like Coinbase to decentralized exchanges where regulators have even less ability to “protect” investors
Venture Capitalist, Tim Draper, criticized the current administration’s use of old laws for a new technology:
"Weak regulators spread fear and strong regulators spread opportunity. The Howey Test was nearly 80 years ago and has no relevance to crypto. I think crypto needs to be regulated in a new way from a new group. I think our regulators are acting way out of line and it's time to reign them in. [Gensler] is damaging our country..."
Our government and media should be teaching people about the benefits of crypto and how to use it. Instead, they’re effectively banning crypto in the US and sending the industry’s jobs offshore.
Meanwhile, the government has over $30 trillion in debt and interest expense for it is about to become its 4th largest expense—ahead of defense. Interest on the debt is up 25% compared to last year and on pace to be about $900 billion.
The long-term fundamental case for Bitcoin has never been stronger, but in the short-term, it’s getting harder to buy crypto, which isn’t going to help the price go up.