Bitcoin beyond 35K for Christmas? Thanks to Jerome Powell if this happens

Historically, a Santa Claus rally occurs in the weeks leading up to Christmas, when a collective sense of goodwill spreads through the stock markets. This is usually a seasonal incident and nothing out of the ordinary. But this year, we could see a much more significant recovery as the US Federal Reserve, the Security and Exchange Commission And black rock Get in line to deliver a bargain of holiday cheer.

The Federal Open Market Committee (FOMC) concluded its penultimate meeting of 2023 on Wednesday and decided to keep interest rates stable. As we know, US inflation has been kept in check from a peak of 9.1% in June 2022 to its current level of 3.7% thanks to the Fed’s aggressive interest rate hike cycle which raised the federal funds rate to 5.25-5.5% – its highest level since 2001.

However, while this campaign was undoubtedly successful, markets remain deeply concerned about the possibility that higher rates, or even rates kept at that level, would trigger a recession in the United States. The Fed also now shares these concerns, as it eases inflation to some extent.

If the next Bureau of Labor Statistics inflation number on November 14 shows a downward trend, we can expect to see money flowing into risky assets as investors anticipate the next rate decision interest rate will be reduced. This will of course have a positive impact on stock markets, and even bond markets, as yields fall and the back end of the yield curve flattens.

Crypto markets will follow, with Bitcoin (BTC) remaining strongly correlated to the main markets. What will provide an additional boost, however, will be the approval of the first US-based Bitcoin spot ETF – which is expected to come before January 10, as predicted by JP Morgan. This is underlined by the enthusiasm generated by rumors about the approval of BlackRock’s application in recent weeks, which sent Bitcoin back up to $35,000: a level it has not reached since the pre-Terra Luna era of 2022.

The possible approval will provide additional momentum to Bitcoin, Ether (ETH), and large swathes of altcoin markets. However, if investors follow the old adage “buy the rumor, sell the fact”, this may not be a huge deal. We could even see a slight decline before a more sustained recovery. There is little doubt, however, that the approval will be positive for the cryptocurrency. Indeed, in the longer term, it has the potential to be the biggest driver of the crypto markets since the conditions created by the Covid pandemic saw BTC surpass $60,000 in 2021.

Potential challenges at play include higher inflation in the United States before the end of the year and potentially increased tensions between Israel and Palestine. Either one could put the brakes on an end-of-year Santa gathering — but that doesn’t seem like the direction to go at the moment.

Indeed, Bitcoin has already seen a strong recovery this year. While the fallout from FTX’s November 2022 crash saw BTC fall into the $15,000 range and starts 2023 at a paltry price of just over $16,000, its level today of $34,000 to $35,000 represents growth of over 100%. Of course, only very smart or lucky traders manage to take advantage of Bitcoin’s extreme volatility. Year after year, many crypto investors continue to experience losses.

For FTX investors, for example, although there is now hope that some will recover their Bitcoin, Ether and other tokens, most will face a sort of Pyrrhic victory as they expect losses of 60-70%. . This explains the generally pessimistic mood in the crypto market, which would otherwise resemble the 2023 winner.

As we approach the end of the year, it would be good for all of us to take a step back and look at the Bitcoin and crypto markets with fresh eyes. Even if we don’t get a much-anticipated and perhaps deserved Santa Claus gathering, we can celebrate the fact that crypto has survived another tough year and is ending with a bang.

Lucas Kiely is Chief Investment Officer at Yield App, where he oversees investment portfolio allocation and leads the expansion of a range of diversified investment products. He was previously chief investment officer at Diginex Asset Management, as well as senior trader and managing director at Credit Suisse in Hong Kong, where he managed QIS and structured derivatives trading. He was also head of exotic derivatives at UBS in Australia.

This article is intended for general information purposes and is not intended to be and should not be relied upon as legal or investment advice. The views, thoughts and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.


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