December 16, 2021

With the FOMC Meeting Behind Us – Can the Bull Market Resume?

Dec 16, 2021

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.

light @lightcrypto

slightly more hawkish than expected fomc statement, and market still ripped up. sell the rumor buy the news indeed.

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/9Z69rJuL0T

Is 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

"I think the Fed opened a window today for risk assets to trade well at least over the next couple of months into the end of QE... Beyond that, it's going to be very hard to make money in our opinion in #crypto..." @42macroDDale

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/QW19JAB2ix

Let’s hope Zhu Su is correct (this time):

Zhu Su 🔺 @zhusu

American tradfi/macro + global retail + logwealth cryptonatives have generally capitulated the last week or so to dynastic participants This was the much needed risk transfer required to properly usher in the next wave of the supercycle

Chart-wise, there are undoubtedly bullish outcomes in the cards:

Michaël van de Poppe @CryptoMichNL

Pretty much copy/paste of the September bottoming here. Given the low impact of the FED meeting on prices, I assume that we'll see price accelerate too if it cracks crucial resistances.

But there are, of course, different possible outcomes:

TXMC @TXMCtrades

This is what a max pain December would look like to me. Boredom drives markets insane. A lot of analysts are calling for a Santa Claus #BTC rally, but I don't feel it's the most likely outcome. Would love to be proven wrong.

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”).

Will Clemente @WClementeIII

Keeping it simple. Looking to either buy reclaim or any type of sweep of the wick with invalidation at 40k.

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…

Joe Weisenthal @TheStalwart

BITCOIN TRADERS HAVE TO BE FED WATCHERS LIKE EVERYONE ELSE NOW It's official. Crypto is just another legacy asset. Might as well be on the floor staring at a screen. bloomberg.com/news/articles/…

tuba 🦈 @0xtuba

need someone to sit down and explain what a “fomc” is to me, slowly

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.

_Checkmate.btc 🔑⚡🦬🌋checkonchain.com🌋 @_Checkmatey_

This is a fascinating chart plotting the correlation between $BTC and $SPX. For years it traded as a largely uncorrelated between +-0.1. Then March 2020 started and fiat debasement on steroids created our new regime where everything is up only forever...Laura...

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!

Jens Nordvig @jnordvig

Turkish lira implosion continues as the central bank again cuts rates. End-game seems to be currency pressure feeding into political change.

The New York Times @nytimes

Turkey's bakers say they can't afford to keep making bread because of price controls and rising inflation. And their customers can't afford to buy it anyway. nyti.ms/3yCAo2g

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!