Cryptocurrencies are looking to Fed pivot again

2:29 pm 5 October 2022

The cryptocurrency market reacted with moderate euphoria to the powerful rebound of Wall Street indices. Recall, the Dow Jones, S&P500 and NASDAQ gained nearly 3% yesterday helping cryptocurrencies to change sentiment:

  • Bitcoin soared above $20,000 however, the market clearly still lacks the fuel to initiate a more dynamic rebound. This suggests that the king of cryptocurrencies will likely have to fight to defend the psychological support at $20,000;
  • Altcoins reacted relatively sluggishly to the powerful rebound of stock market indices. Ethereum remains in the range of $1330 - $1350, Ripple remains above $0.45;
  • Wall Street futures suggest a lower opening today after the euphoria of recent days. Markets are once again starting to aggressively bet on a faster Fed retreat from its aggressive hike cycle over recession fears and a possible surprise from weak labor market data. Investors this week will focus on Friday's NFP data. Today we'll learn the ADP report, which could be a 'prelude' to Friday's key reading. Again along the lines of 'bad is good' the stock market will be supported by weak data;
  • It is still unclear whether the Federal Reserve is considering a real weakening of the existing narrative and whether it will decide to ease the hike cycle in an environment of galloping inflation. Bankers seem to be reconciling themselves to an economic slowdown and rising unemployment. These circumstances are ultimately necessary to cool inflation, as the Fed has repeatedly emphasized;
  • A European Parliament resolution under the MiCA Markets in Crypto-Assets bill recommended that authorities in the 27 EU member states consider "simplified tax treatment" for cryptocurrency users engaged in sporadic or small transactions, which could hit the volume and liquidity of cryptocurrency exchanges. To date, most tax rules in foreign jurisdictions only apply when cryptocurrency users purchase real goods with them or exchange them for fiat money;
  • Taxing cryptocurrency trading could discourage parts of the market from systematically speculating on cryptocurrency exchanges. On Oct. 4, 566 of the 705 EP members voted in favor of the resolution. EP Vice President Eva Kaili pointed out that blockchain technology could automate tax collection, reduce corruption. She added that the EP should work to improve the analytical capabilities of tax administrations. MiCA regulations could go into effect as early as 2024;

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  • The mining landscape of the Bitcoin market appears to be improving somewhat, as indicated, among other things, by the growing computing power of the so-called hashrate (Glassnode) network;
  •  Argentine state-owned mining company YFP has launched a 1MW power plant to support Bitcoin miners. Before the end of the year, YFP intends to complete a much larger 8MW power plant project, which will be devoted entirely to supporting miners of the Bitcoin network. The company did not disclose the name of the mining company that is supported by its energy power;
  • Recall, in June of this year, US Bitcoin mining pioneer Crusoe Energy conveyed that it would expand its mining operations in the Arabian Peninsula, Abu Dhabi and Oman, following state subsidies.

The Fear and Greed Index rose 5 points thanks to yesterday's rebound and Bitcoin's final successful climb above $20,000. This does not change the fact that the level still indicates extreme fear, which favors the supply side. Once again, cryptocurrencies seem to be at the mercy of Wall Street. Source: alternative.meRipple price, D1 interval. The 50-session SMA 50 average is clearly approaching the SMA 200, which, if the upward trend continues, would herald a possible 'golden cross' heralding a change in the trend to upward. The RSI near 60 points is close to overbought levels above 70 points, levels that have historically heralded a correction. The Ripple price has been knocked down three times from levels above $50, raising concerns of a deeper correction, but demand has responded actively each time around $0.43. Ripple's listing is likely driven by the ever-closer finality of the dispute with the US Securities and Exchange Commission (SEC). Source: xStation5

Bitcoin price, H4 interval. The SMA50 average is approaching the 200-session average on the four-hour interval, which may herald an impending intersection known as the 'golden cross'. Previously, in July, the bottom crossing of the SMA200 by the 50-session moving average heralded an almost 30% retracement. Source: xStation5

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