The New York Attorney General filed early Thursday a lawsuit against Genesis, Gemini and DCG for allegedly defrauding investors of $1 billion.
Bitcoin to $27K next? One-week BTC price highs precede Fed’s Powell
Bitcoin clinches a BTC price boost as the latest U.S. macro data flows in, with all eyes on Powell next.
Jackson Hole: Where Fed Policy Is Decided on the Fly
Bitcoin price breaks from range with drop below $28K, and options tilt toward BTC bears
$570 million in weekly BTC options expire on Friday, and the recent macro and crypto news events have further tilted the advantage to bearish traders.
Bitcoin price data suggests bulls will succeed in holding $30K as support this time
Two key Bitcoin price metrics suggest that bulls will be able to hold the $30,000 level as support.
Bitcoin stays flat at $26K after PPL data as markets await Fed’s Powell
BTC price action shrugs off the latest signs that inflation is receding, with Bitcoin traders focused on Fed comments.
Bitcoin Price Poised To Rally Big-Time On Today’s PCE Release
The Bitcoin price could see a significant uptick today Friday, December 23 at 8:30 am (EST) if the Core Personal Consumption Expenditures Price Index (PCE) comes in better than expected. And the chances are high!
Bitcoin price has been heavily dependent on macro data and the decisions of the U.S. Federal Reserve (FED) lately. The last FOMC meeting of the year on December 13 provided a bearish surprise, even though the consumer price index (CPI) came in better than expected.
However, there was a catch. After the FOMC meeting, rumors emerged that chairman Jerome Powell ignored the CPI data that arrived a few hours before the meeting, although he claimed the opposite in the press conference. Within Wall Street, several analysts spoke out, accusing Powell of hoaxes.
Why Today’s Core PCE Is Of Paramount Importance
The problem is that the Fed’s forecast for core PCE inflation seems far too high after the surprisingly weak CPI data, as Tomas Lee, an analyst at Fundstrat, writes.
As the economic forecast overview shows, the FED raised the core PCE inflation target for 2022 from 4.5% to 4.8%. With that, Powell added to the “higher for longer” narrative. But there is something “odd,” as Lee explained. The month-to-month percentage change in inflation would have to be staggeringly high to reach the FED’s 4.8% target.
Lee wonders how the FED can forecast 4.8% core PCE inflation in 2022 when inflation is moving toward 4.1-4.2%. “How can Fed forecast be so far??” Lee wrote.
The analyst points to a ransomware attack on Haver Analytics as a possible reason for this large divergence. Due to the attack, Haver Analytics may not have been able to update the data, which is why Jerome Powell and the FOMC committee ignored the positive data.
Therefore, according to the Fundstrat analyst, today’s PCE release is of massive importance. Lee writes:
We think core PCE inflation will be 0.10% compared to Cleveland Fed inflation NOW forecast of 0.26%. Any figure below 0.40% would make #FOMC figure of 4.8% too high.
Remarkably, the PCE is also the key data point for the U.S. central bank. The FED’s forecasts and its 2% target are not based on CPI, but on the PCE. Twitter user ZeroHedge estimated based on this fact:
If tomorrow’s core PCE is 4.5% or lower (~75% chance), the entire hawkish FOMC repricing is blown out – no way 4.8% core PCE in December, SEP/Dots repriced and terminal rate tumbles.
The Impact On The Bitcoin Price
If the PCE is significantly below the FED’s expectations, the theory would find confirmation today and could completely wipe out the bearish sentiment. The FED would possibly be forced to revise its forecasts as the PCE shows that inflation is under control.
This could prompt the FED to take a more dovish stance at the next meeting, with markets front-running this as early as today. Ultimately, the PCE release could lead to a weaker dollar, spurring risk assets like Bitcoin.
At press time, the Bitcoin price stood at $16,827. Today, like the last few days, the $16,900 level will be of key importance as the most crucial resistance at the moment.
If there is a strong push above this resistance, the next target would be the $17,400 region. Otherwise, Bitcoin investors should keep an eye on the support at $16,400.
Upcoming FOMC Meeting Is The Most Important Ever For Bitcoin – Watch Out For The Dot Plot
With the Bitcoin price posting a small gain of over 1.5% over the last seven days, the market is in for a blockbuster next week.
The release of the Consumer Price Index (CPI) on December 13, Tuesday at 08:30 AM ET, will once again be “the most important CPI ever”.
Just one day later, on December 14, Wednesday at 2:00 PM ET, the final Federal Open Market Committee (FOMC) meeting of the year will take place. Remarkably, FED members will release their updated forecasts for inflation and interest rates (dot plot) at the meeting.
A Blockbuster Week
The dot plot is released only four times a year – in March, June, September, and December – and presents the FOMC’s economic projections, which look at GDP, unemployment rates, and inflation for the coming months as well as over the longer term.
Within the dot plot, each member of the Committee publishes its view of potential interest rates over the longer term.
For investors, this is extremely useful information as it allows market participants to see if the consensus path for longer-term interest rates is changing.
The markets, as well as Bitcoin investors, will therefore be eagerly watching the inflation forecasts for next year, as well as the interest rate expectations for 2023 and 2024.
As economic journalist Colby Smith wrote in November, the September dot plot showed most officials favored a slowdown to 50 basis points in December.
The question for next week will be whether the Fed, led by Powell, will put into play a slower rate hike pace of 25 basis points (bps) or even a pivot.
The Fed introduced the notion of slowing down the pace of hikes in July and the September dot plot showed support from most officials for a downshift to 50bps in December. The question today is how far Powell goes to ratify that move https://t.co/Pn8n0lh4kZ @FinancialTimes pic.twitter.com/62XOqMlm3T
— Colby Smith (@colbyLsmith) November 2, 2022
A Year-End Rally for Bitcoin?
These two events could be the “last remaining hurdles” for a year-end rally for Bitcoin, QCP Capital wrote in an analysis.
However, a higher-than-expected consumer price index and a tighter stance by the Federal Reserve could derail that rally, as was seen in the April and August reversals.
On the other hand, further disinflation could lead many to seek a continuation of the rally through the end of the year, according to QCP Capital’s analysis. It goes on to say that the question markets now face is where inflation will bottom.
Even if 2% inflation is out of reach next year, will it fall low enough such that the Fed will have room to cut rates while keeping real rates positive?
Therefore, one key market theme for next year will be the shift from ‘peak inflation’ to ‘trough inflation’.
This is another reason why the dot plot is of paramount importance. As the last two releases show, Powell has stuck relatively strictly to projections regarding interest rates. Thus, the dot plot could reveal some insights into Powell’s thoughts about a pivot.
If the new data matches CPI expectations, it would be the fifth consecutive monthly decline. After peaking at 9.1% YoY in June. Next week’s reading could be even the lowest since January.
Will Powell Follow His Words
Given Powell’s recent comments to the Brookings Institute on November 30, it is also likely that the FED will stick to the script and raise the policy rate by only 50 basis points to 4.5%, reinforcing bullish sentiment in the market.
If the CPI even comes in below expectations, markets could frontrun the Fed’s decision and trigger an end-of-year rally. In any case, next week will provide blockbuster volatility in the Bitcoin and crypto markets.
Investors should pay close attention to the release of the FED’s dot plot.
At press time, Bitcoin was trading at $17,228, showing signs of strength ahead of the FOMC meeting.
2 key Ethereum price metrics suggest traders will struggle to hold the $2K support level
ETH bulls are aiming to flip $2,000 back to support, but these two metrics point toward further downside.
Fed Chair Powell Says Crypto Requires New Rules, Citing ‘Threats’ To US Financial System
Federal Reserve Chairman Jerome Powell emphasized on Wednesday that technology transformation is here to stay in the financial sector and that new regulations will be required.
Powell revealed some insight into how the United States would govern the market during a presentation at the Bank of International Settlements Innovation Summit on central bank digital currencies.
The digital age was not taken into consideration when establishing our current regulatory structures, the Fed official said.
“There will be revisions to current laws and regulations, as well as the creation of wholly new rules and structure, if central banks, stablecoins, and digital currencies are to be implemented,” he said during a roundtable discussion on CBDCs at the BISI Summit.
Is There A Threat?
Powell noted that emerging forms of digital money, like cryptocurrencies and stablecoins, pose threats to the US financial system and will necessitate the adoption of additional consumer protection measures.
Powell reaffirmed his position that cryptocurrency should adhere to the “same activity, same regulation” premise.
He proposed regulating stablecoin issuers, such as banks, in October 2021.
“Stablecoins function similarly to money market funds. They’re similar to bank deposits… and it is reasonable for them to be controlled similarly, same activity, same regulation,” he concluded.
Powell Says DeFi Can Improve Finance Sector
Despite this, the Fed chairman acknowledged that distributed technology and DeFi have the potential to improve the payment system’s efficiency and foster a more competitive financial sector.
This is an impressive recognition from the director of one of the country’s premier financial institutions. Other agencies and their personnel have embraced crypto and blockchain technology as well, albeit they all appear to advocate for some level of regulation.
Crypto total market cap at $1.94 trillion on the daily chart | Source: TradingView.com
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Stablecoins are a type of cryptocurrency that are typically backed by the dollar or a commodity such as precious metal.
CBDCs are digital representations of dollars or other fiat currencies that governments issue. The Fed is exdigital currencies but has not yet decided whether to issue them. In January, it published a study on stablecoins.
Biden’s Executive Order
US President Joe Biden signed an executive order earlier this month directing the Treasury Department and other federal agencies to conduct a study on the impact of cryptocurrency on economic stability and national security.
Biden’s directive comes as many Democratic legislators, notably Massachusetts’ Elizabeth Warren, have expressed worry that cryptocurrency could be used to circumvent US sanctions against Russia.
As part of the executive mandate, the Treasury is leading a report on a CBDC in consultation with the Departments of Justice, Commerce, and State, as well as the Office of Management and Budget, Homeland Security, and the Director of National Intelligence, to determine whether the US should pursue a digital dollar.
Suggested Reading | Bitcoin Breaks Past The $40,000 Barrier Again – Can It Sustain The Momentum?
Featured image from CryptoSlate, chart from TradingView.com
FED’s Powell Doesn’t Think Crypto Risks Financial Stability
The crypto market cap has moved up to $2,2 trillion after the Fed announced they would double the tapering of bond purchase and interest rates will stay the same for now. Fed’s chairman Jerome Powell held a news conference after the decision was taken where he approached several issues on the United States economy and current concerns for its financial stability.
Crypto total market cap at $2,2 trillion in the daily chart | Source: TradingView.com
Related Reading | Bitcoin, Ether Spike After Fed Announce No Change To Interest Rates
When asked about the concerning risks and systemic issues that could affect the U.S. financial stability nowadays, Powell broke it down to four essential “pieces” that the Feds “hold” themselves to. In his words, that’s separated in the following keys:
- Asset valuations: “are somewhat elevated”, Powell says.
- Debt owed by businesses and households: “households are in very strong financial shape”, and “businesses actually have a lot of debt, but their default rates are very very low.”
- Funding risk: The fed sees “market funds as a vulnerability and would applaud the SEC’s action this week”, claims Powell.
- Leverage among financial institutions: “is low in the sense that capital is high.”
Followingly, Powell named scenarios that they are looking at as possible risks, which start at the “emergence of a new [Covid] variant” and the concerning possibility –with no basis– that it could be resistant to vaccines. Similarly, they fear “a successful cyber attack” that could take down a major financial institution. The chairman says this is the one scenario they would not know how to deal with.
Even though the reporter’s question had clearly meant to assess risks from the crypto industry, Powell did not even get close to mentioning it within his “list of horrible”, and when asked again to clarify if it is a concern to him, Powell responded: “I think the concerns there are not so much current financial stability concerns.”
However, the chairman does see cryptocurrencies as “speculative assets” that are “risky” and “not backed by anything”, and he sees consumers issues for those who “may not understand what they’re getting”.
Powell also thinks that certain events in the crypto market, like the kind of leverage built-in, should be followed, but that is not within the Feds jurisdiction, he reminded.
Stablecoins Could Scale, Powell Thinks
As Powell is currently not in favor of a crackdown on crypto similar to China’s to happen in the U.S., he does have considerations regarding other possible risks and agrees there should be certain regulations. He now expressed support to Biden’s working group report on stablecoins.
Although, that report disappointed many as it failed to provide regulatory clarity and called for a new bill to “limit stablecoin issuance, and related activities of redemption and maintenance of reserve assets, to entities that are insured depository institutions.”
The report puts all the weight on Congress and does see stablecoins as a possible systemic risk and wants to stop them from having “an excessive concentration of economic power”, a statement in which people saw the huge irony of the government not wanting such a strong competitor for the banking industry.
In Powell’s views, “Stablecoins can certainly be a useful, efficient consumer-serving part of the financial system if they’re properly regulated,” and as there are no regulations at the moment he thinks “They have the potential to scale, particularly if they were to be associated with one of the very large tech networks that exist.”
You could have a payment network that was immediately systemically important that didn’t have appropriate regulation and protections. The public relies on the government and the Fed in particular to make sure that the payment system is safe and reliable.
As many can agree on the fact that certain regulations are needed to provide clarity, the report in question doesn’t paint the best picture. Powell’s statement, however, could be met halfways.
Related Reading | CBDCs to coexist with cash payments, according to FED Chairman Powell
SEC Chair Gensler: SEC Will Not ‘Ban’ Crypto
U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler reiterated to Congress this week that the SEC has no plans to ‘ban’ cryptocurrencies.
In a direct reply to North Carolina Congressperson Ted Budd regarding any considerations of banning crypto to promote a central banking digital currency, or CBDC, Gensler stated “no, that would be up to Congress.”
The statement came during a four-hour long hearing regarding crypto and DeFi.
The SEC Stance
Gensler’s remarks come just a week after Federal Reserve Chair Jerome Powell echoed similar sentiments. Powell told the House Financial Services Committee that the Fed had “no plans to ban” crypto.
However, Gensler did reiterate that crypto exchanges should register with the SEC, and that most crypto tokens will be viewed as securities. He also added that DeFi platforms are going to be subject to public policy.
Of course, any regulatory move to outright ‘ban’ cryptocurrency in the U.S. is surely more effort than the outcome would be worth. There are increasing amounts of legislators across the U.S. that are coming on-board with crypto, and exchange accessibility and utilization for U.S. consumers is increasing rapidly.
Lawmakers and regulators are ideally coming to terms with a set of facts that ring true for categories like sports gambling and marijuana: outright bans are a waste of time and resources, and everyone is generally better off working towards a healthy yet regulated marketplace.
The market cap of crypto tokens not named Bitcoin is in excess of $2T, leading both state and federal regulators to pull out the microscope. | Source: CRYPTOCAP: TOTAL 2 on TradingView.com
Related Reading | Whales Moving Coins Hints At Bitcoin Maturity As Macro Asset
A Push And Pull
The sentiment comes just days after the SEC extended the decision deadline around a number of Bitcoin ETFs. The commission has faced increased pressure to have some sort of regulatory stance, hands off or otherwise, around crypto. Gensler, meanwhile, has been relatively reserved in statements to the public about the future of crypto in the states. Our team at NewsBTC took a deep dive into a recent Gensler interview with the Washington Post that left many crypto spectators with more questions than answers.
The SEC was also engaging in a back-and-forth battle with Coinbase, leaving the crypto exchange with little traction to work with around their anticipated Coinbase Lend product. After SEC threats, Coinbase dropped the interest-yielding project, with Coinbase CEO Brian Armstrong expressing frustration along the way.
The recent sentiments from Gensler and Powell do not eradicate any sort of potential hurdles for crypto, however. Coinbase also expressed concern about Congress’ infrastructure legislation in recent weeks. The full impacts, including potential tax implications, around that legislation and crypto are yet to be established.
Related Reading | Bitcoin Price Taps $50K, But Here’s Why Bulls Aren’t Out Of The Woods
Featured image from Pexels, Charts from TradingView.com
