Of the Bitcoin-Price reacted to yesterday’s FOMC minutes release with a brief bounce to $16,990 only to bounce back to the previous range of around $16,800 within 30 minutes. And this trend could continue in the coming weeks and months. Macro analyst Alex Kruger explained:
Welcome to the 2023 Pump and Whack Ranging market. Markets will pump when falling inflationand the Fed is beating against it.
The analyst based his opinion on a series of tweets from The Wall Street Journal’s senior economic correspondent Nick Timiraos. The renowned journalist said one of the key statements in the meeting minutes was that Fed officials were concerned that “unjustified easing in financial conditions” could “complicate” their fight against inflation.
That’s probably one reason why the FOMC minutes have almost no discussion of how much officials plan to hike rates at the February meeting. Instead, the minutes say officials remain faced with a difficult communication task and want to avoid broad “unwarranted” easing of financial conditions.
As investors see inflation falling faster and react with relief rallies, the Fed could quash that euphoria in return. If the CPI data comes out much better than the estimates, the phenomenon of December 13th and 14th, when the CPI data and the FOMC meeting happened back-to-back, could be repeated.
Leading up to and following the release of the CPI data, bitcoin price surged almost 10% to $18,350 only to be brought back to earth by the Fed’s hawkish comments. Bitcoin subsequently fell 12% to $16,280.
This “pump and whack” trade could continue into January and February as numerous pundits are predicting another significant drop in inflation. December 2022 CPI data will be released on January 12, 2023 at 8:30 am EST. Therefore, positive numbers could start a rally, but with a tight expiration date.
The next FOMC meeting will be held from January 31st to February 1st. The subsequent press conference will then take place as usual on the second day at 2:00 p.m. EST. Then the Fed’s restrictive hammer could hit and send the Bitcoin price falling again.
At press time, bitcoin price was trading at $16,793 and remaining in a tight range of $16,250 to $17,000 until December 17.
Bitcoin price (BTC / USD), 1-day chart
Bitcoin price ahead of next FOMC meeting
Minutes also show that Fed officials agreed that the Fed needs to slow the pace of its aggressive rate hikes (50 basis points in December). At the same time, it noted that “most participants emphasized the need to maintain flexibility and optionality when policies shift to a more restrictive stance”.
This could suggest that Fed officials might be ready to return to a quarter-point hike at the next meeting, but also that they remain open to an even higher-than-expected final rate if high inflation persists.
The minutes also show that at the December meeting relatively few concerns were raised that the central bank could go too far and trigger a recession at this point. Only a few participants acknowledged that risks to the inflation outlook must have become more balanced, meaning that the risk of doing too little is no longer much greater than the risk of doing too much.
In response, Goldman Sachs commented that “the Fed will either pivot too early and move into a high-inflation scenario that turns the USD fairly bearish, thereby supporting gold, or pivot too late and cause a much bigger recession than is currently priced in, resulting in a flight to safety helps gold.”
Featured Image from Yahoo! Sports, chart from TradingView.com
Source: Crypto News Deutsch