Sirwin
Sirwin

The FED Announcement and What It Means for Crypto | Crypto Market Update 12.15


Overview

  • Market Insight: The Fed Announcement

  • Crypto Market Update

  • Major Crypto News Today

  • NEWBIES’ lesson of the day: The effect of leverage on the crypto markets


 

Market Insight: The FED announcement

 

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The Federal Reserve announced the scale-back of aggressive monetary policy that began pre-pandemic in direct response to rising inflation. This past report covers the CPI rate of 6.8% announced in early December. The FED stated they would begin tapering bond purchases by 30% followed by rate hikes that are projected to begin in early 2022. The FED predicts inflation will reduce by 50% by the end of next year alongside improved economic numbers. Omnicron was noted as variable.  

What this means for crypto

There lies a possibility that rate hikes could trigger the end of the crypto bull run. Their delay would be the best scenario. The rates will likely be 0.0% until March or May but a few factors such bad economic results or Omnicron could alter this stance.

Lower rates allow market participates greater access to debt. More debt equates to greater sums of money in the market, and this permits traders to take on greater risk. Traders will be inclined to take less risk if the money supply decreases. Crypto is an on-risk asset because of its high volatility and will be highly affected by rate hikes. The March and May FOMC meetings will hold the utmost importance for crypto.

 

FOMC scheduled meetings:

  • January 25-26       (likely decrease in bond purchases by another 30%)
  • March 15-16         (likely completion of bond purchases, possible rate hike)
  • May 3-4                 (Likely rate hike)

 

The drawdown in Bitcoin was related to the FED’s hawkish stance following the CPI inflation mark. Crypto has a higher probability of correcting now that a not-so-aggressive policy change has been absorbed.

All in all, this is the best news for crypto. Between the high inflation numbers and the political scrutiny, it was probable the FED would increase tapering. The crypto market will encompass a favorable 2-3 months of 0.0% rates and it could be indicative of a strong January and possible EOY run.

 


 

Crypto Market Update

 

*All prices were gathered after the FOMC announcement

Bitcoin (BTC) is up 1.08% for the day and showing strong signs

Stablecoin Dominance (USDT.D) is at 3.42% and falling. The base is 2.7%, signaling a large availability of stablecoins

Bitcoin Dominance (BTC.D) is down -1.48% as funds re-entering market look for riskier alts *notable gainers below

Total Market Cap (TOTAL) is up big +2.55%

 

Notable Gainers

  • AVAX            +16%
  • MATIC           +9%
  • EGLD            +16.6%
  • HBAR            +9.4%
  • ONE             +9.8%
  • SOL             +9.9%
  • FTM             +11%

 

Bitcoin Fear and Greed index        29 fear

Bitcoin Google Trends                    31

Max Pain (Dec 30 Options)           48k

How to use The Fear and Greed Index for investing

 


 

Major Crypto News 12.15

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NEWBIES’ Lesson of the day

The effect of leverage on crypto markets

This lesson goes in conjunction with the NEWBIE lesson on yesterday’s report.

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Leveraged positions have a strong effect on the crypto market. The more leverage there is, the more volatility will increase. Volatility is the velocity of up and down movement of price.

If a trader holds a leveraged position of 10:1, he essentially is opening 10 positions. This is a common leverage available to anyone who can access an exchange. Leverage can be as high as 150:1 on some trading platforms. That means you can open 5.5 DOT positions with one dollar! If this seems ridiculous and risky, it’s because it is. Exchanges earn notable profits on leveraged trading fees and since bots control the stop losses, they pose little risk to the exchange.

Stop losses for leveraged positions are typically close to the current price of any asset. If price moves aggressively in one direction, many leveraged positions tend to be stopped out. If 100 open trades with 100:1 leverage (100x100) are being stopped out, that is 10,000 positions being closed at once. This puts tremendous pressure on price to move quickly (volatility) while attempting to close all positions.

The risk is bidirectional whereas leveraged positions can be opened long or short. Longs are buyer that want the market up and shorts are sells that want the market down.

Most holders don’t want an excess amount of leverage in the market. Holders prefer a spot-driven market opposed to a leverage-driven market. The volatility in a leverage-driven market contributes to a lot of traders selling dips exaggerated by leverage.

  • Leveraged positions add volatility to the market
  • Leveraged positions hold a lot of risk
  • Leveraged positioned are near the current price
  • When there are high numbers of directional positions, the risk lies in that direction
  • When the market moves quickly in a direction, it will be exacerbated by leveraged positions

Tomorrow I will show you how to spot leverage in the markets, now that you have a better understanding of leverage. It will be another valuable tool in helping you make future decisions in these wild crypto markets.

 


 

I hope everyone enjoyed being trillionaires for a few hours last night during the CoinMarketCap glitch. If we hodl long enough, maybe it will be real one day!

 

Thanks for reading fam!

TraderGabi

 

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To reap the benefits of this newsletter it’s recommended to read it every day to stay in tune with crypto markets. It will put the reader in the 2% of market participates that are well informed. The reader will begin to see opportunities that are not apparent to most and will open up many more. The newsletter is composed of many hours of daily research in charts, on-chain metrics, news and developing narratives condensed to a 5-minute update. It’s my contribution to a crypto community that has contributed so much to me.

 

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Gabi_
Gabi_

Market Research Analyst . Crypto Enthusiast. Hours of research condensed into a daily five minute report.


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