The crypto market is up today and Bitcoin (BTC) price jumped 3.1% on November 15 to $17,171, as confidence briefly returned to the global macro outlook with a lower-than-expected producer price index (PPI) print and a cooling US dollar.
Crypto and equity markets are responding PPI data which shows wholesale prices rose 0.2% for the month and 8% from a year ago. This was less than the 0.4% monthly estimate and the previous 8.4% monthly increase. The news sent the Nasdaq up 2.5% and the S&P 500 up 1.4%.
FTX went bankrupt last time triggered an incredible amount of volatility, but Bitcoin price reacted positively by rallying above $17,000 as traders danger of final capitulation hasn’t arrived yet. Let us examine the three main factors affecting the strength of the crypto market in the current environment.
With volatility still possible among the FTX situation continuessome Analysts believe that the bottom is still not in for the crypto market and BTC on-chain losses The highest value of SOPR shares in March 2020.
The picture for the rest of Q4 remains muddy, as some analysts still expect 2022 to copy the bear market of 2018. At the same time, there is hope that this bearish trend will gone for good at the beginning of 2023.
The Federal Reserve is making some progress on inflation
High inflation it has been a problem for a year and back-to-back negative CPI reports have given the Fed few reasons to keep raising rates. After the CPI data rises Bitcoin is up $1,000 in minutes on November 10, a positive PPI indicates to the market that inflation may have peaked.
As inflation appears to be falling, rumors are gathering about the prospect of a rate hike. After the positive PPI figures and the 75-point increase in November, the assumption is that the policy will begin a U-turn, making smaller increases in the following months before being canceled altogether in 2023.
Federal Open Market Committee (FOMC) this December expected to produce an increase of 25 to 50 basis points, not the usual 75 bps, according to CME Group’s FedWatch Tool.
The unemployment data released on November 4 caused bull confidence. Coming in higher than expected, the implication is that rate hikes may have the desired effect — and the elusive Fed pivot could come sooner rather than later.
Bitcoin open interest is down after a spike in volatility caused by FTX
The data shows that the volatility of BTC/USD is in the lowest per year at $16,000 but the bank’s FTX run translates into a spike in investor demand.
Bitcoin open interest also appears to have fallen sharply after a volatile week after the FTX collapse. On November 5, BTC open interest was at $32.8 billion and fell sharply to $18.5 billion on November 14.
In October, Bitcoin’s volatility even fell below that which are some of the major fiat currencies, making BTC look more like a stablecoin than a risk asset.
A look at the Bitcoin historical volatility index (BVOL), recently in the multi-year low seen only a handful of times, has begun to increase greatly to over 25.05.
William Clemente, founder of crypto research firm Reflexivity Research, noted that Bitcoin’s funding rate is finally negative. believe reversal signal.
The dollar is a new thing
After a parabolic uptrend throughout 2022The US dollar index is now starting to show signs of cooling off.
The US dollar index (DXY) recently reached the highest level since 2002, and momentum may have cooled after recent CPI and PPI prints show the Fed is making some progress with run-away inflation. In a perfect world, investors would ideally see the retreating DXY as a reason to increase sentiment for risk assets like cryptocurrencies.
In the meantime, DXY is under pressure and the descent comes in lockstep with the return to form for Bitcoin and altcoins. Historically, a cold DXY is followed by Bitcoin price moving in the opposite direction.
Overall, the crypto market will continue to see price whiplash and most analysts agree that there are many volatile days ahead, but positive macro news about potential peak inflation provides a nice short-term bump in crypto prices.
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