Jerome PowellThe crypto market has begun to recover, and investors anticipate an imminent bull run. Nevertheless, not everyone is optimistic about Bitcoin’s comeback. The Chairman of the Federal Reserve, Jerome Powell, continues to forecast doom for the crypto community.
Following Federal Reserve Chairman Jerome Powell’s remarks that the central bank is beginning to bring inflation under control, the price of Bitcoin fluctuated upwards alongside the stock market before settling lower. However, Jerome Powell stressed that it would take a considerable amount of time to subdue inflation completely.
Jerome Powell hangs on to global inflation
The digital assets market soared after the U.S. central bank chairman, Jerome Powell, appeared at the Economic Club of Washington, D.C., Tuesday and suggested that inflation would drop lower. Jerome Powell stated that while the “disinflationary process” has begun, it will be quite some time before the U.S. Federal Reserve can declare victory in its battle against increasing prices.
In response to questioning from the co-founder of the asset management firm Carlyle Group, David Rubenstein, Jerome Powell stated during the event that “it is not at all guaranteed” that inflation will “go away easily and painlessly.”
Last week’s post-meeting press conference by Jerome Powell was significant for sending traditional markets and bitcoin (BTC) considerably higher when he announced that the “disinflationary process has started.” Tuesday afternoon, the Fed chairman maintained this approach but underscored that the process is just beginning and that additional rate increases will be required.
This process is likely to take quite a bit of time. It’s not going to be smooth […] the biggest challenge we face at the Fed is getting inflation down to 2%.
Jerome Powell
However, Jerome Powell stated that substantial progress on inflation would be made this year. The Fed chair’s comments are good news for traders dealing with “risk-on” assets like Bitcoin.
The Fed began aggressively raising rates last year in a bid to manage 40-year-high inflation, first by raising them by 75 basis points four times, which hurt the value of stocks, shares, and cryptocurrency.
The crypto market has been battered by US equities, notably tech companies, as traders shifted risk and retreated to the dollar. At the same time, the Fed pursued an aggressive monetary policy to reduce inflation to 2%.
However, markets have begun to recover as the Fed shifts its stance. Bitcoin has increased by more than 35% in the last 30 days. Since the interview began, Bitcoin has gained over $300, and it is now trading at $23,300.
Traditional markets are also responding, with the Nasdaq up 1.5% and the S&P 500 up 1.1%; the 10-year Treasury yield is down four basis points to 3.61%.
Bitcoin on-chain metrics read bullish
On-chain statistics indicate that bitcoin, the world’s largest cryptocurrency by market capitalization, is gaining traction.
According to Glassnode data, the bitcoin supply “in profit,” which is the percentage of existing coins whose price at the time they last moved was lower than the current price, has climbed since the beginning of the year. Since early January, the indicator has risen by more than 20%.
This means that larger and longer-term investors are now holding successful spot holdings on paper. This trend is beneficial for the later half of a bear market, as a persistent 30-day upswing following an extensive slump on this indicator has historically produced a favorable buy signal for the next two years,” according to the research.
On-chain data also reveals that “HODLer” (long-term holders of cryptocurrency) belief is high, with bitcoin’s Reserve Risk recently falling to its lowest level ever.
Bitcoin’s Golden cross confirmed
A significant technical event has just taken place in the Bitcoin market. Bitcoin’s 50-day Simple Moving Average (SMA), now at $19,825, has crossed over its 200-day SMA, now at $19,723, for the first time in more than a year. When the 50-Day SMA crosses over the 200-Day SMA, technicians call this a “golden cross” — an indication that the market’s momentum has shifted significantly in a favorable direction. The golden cross on Tuesday is only Bitcoin’s sixth in the past decade.
Some analysts interpret a golden cross as a buy signal, or at the very least include it in the set of technical and other indications they monitor when making trading choices. As both the 50-Day and 200-Day SMAs are extensively followed technical indicators by investors, a golden cross could result in increased buying pressure in the Bitcoin market if it encourages additional buyers to enter the market.
According to a survey by digital asset monitoring firm Arcane Research, institutional traders have favored bitcoin exposure over ether exposure thus far in 2023.
Open interest in bitcoin (BTC) futures listed on the Chicago Mercantile Exchange (CME) has increased by 6% this year. However, according to Arcane Research, open interest in ether (ETH) futures has decreased by 29%.
Open interest is the number of outstanding derivative contracts that have not yet been settled for an underlying asset.
According to the research, smaller cryptocurrencies have also risen in January, spurred by short squeezes, inadequate liquidity, and increasing risk appetite among retail investors encouraged by BTC’s surge. According to the analysis, ETH’s comparatively lackluster start in January relative to other altcoins could be attributed to the fact that ether hasn’t risen as quickly as bitcoin.
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