December 16, 2021
With the FOMC Meeting Behind Us – Can the Bull Market Resume?
Introduction
Well, yesterday was an interesting day in the markets, to say the least: After lots of fear and price declines in stocks and crypto leading up to it, yesterday’s FOMC meeting turned out to be what many expected: A “buy the news” event, where we saw both stocks and crypto popping up from their lows.
Zen @Zen_Trades1
Bitfinex laying down bids Retail selling into the lows ahead of FOMC Meeting with funding negative across the board Feels like we're going to get a Buy The News event #Bitcoin $BTC https://t.co/9Z69rJuL0TIs This the End of “Fed Fear” Dominating the Crypto Market?
Can we finally put the fear of the Fed crashing the markets to rest? Well, yes and no. While the Fed signaled a hawkish posture yesterday by accelerating its tapering and rate hike plans, the markets had already expected this. As Darius Dale puts it, this might open up another window for risk assets to do well for a while.
Real Vision @RealVision
The Real Vision Daily Briefing📊 Where is Monetary Policy Headed Now? @42macroDDale joins @MacroAlf for a look at everything from the #FOMC & the macro landscape to how investors should be thinking about rebalancing their portfolios before 2022. LIVE 👇 https://t.co/QW19JAB2ixLet’s hope Zhu Su is correct (this time):
Chart-wise, there are undoubtedly bullish outcomes in the cards:
But there are, of course, different possible outcomes:
If you’re unsure what to do right now, here is a possible strategy outlined by Will Clemente (as he points out, this strategy only affects his short-term trading stack and not his long-term “HODL-portfolio”).
When looking through the initial “buy the news” euphoria, however, the reality is that monetary and fiscal conditions will become tighter in the weeks and months ahead. Combined with signs of a slowing economy, this should, in theory, not bode well for risk assets.
Even though the equity and crypto markets might have been given another pass for now, it's clear that we can't take our eyes off the macro environment for the foreseeable future. While everyone in the crypto community would love to see a decoupling from traditional markets, the fact is that Bitcoin and co. traded in lockstep with equity markets yesterday – down to the minute candle…
It’s just a reality the crypto community has to face: the more institutional money flows into the crypto space, the more correlated crypto becomes with traditional markets overall.
There is a likely scenario, however, where subsectors within the crypto space that are highly demand-driven (like gaming and NFTs, for example) can decouple at least to an extent from the movements of the overall markets. Spotting such opportunities will be a central focus of us since the macro investing climate going forward will not be what it was in 2020!
Meanwhile, some of the best “advertisement” for Bitcoin and crypto is coming out of Turkey, where the Turkish central bank cut interest rates today to fight inflation (yes, you heard right: “cut”). It’s no surprise that the Turkish Lira is and has been in free-fall for months, fueling one of the highest crypto adoption rates in the world!
To wrap it up, below is some advice for people who try to navigate these crazy markets. The critical thing to know is when to step on the gas and when to step on the brake. Let the macro environment and your conviction be your guides. And most importantly: follow a plan!
Thanks ! 🙏