The week that we are experiencing on the stock market is the last decisive week in terms of economic fundamentals, with the continuation of disinflation in the United States and a new increase in the rate of the Federal Reserve (FED). Despite the rebound in its historic volatility, the bitcoin price is still slow to make its technical choice given the post-FTX feverishness.
The Federal Reserve (FED) terminal rate is in sight but the FED remains restrictive
This Tuesday, December 13 saw the publication of inflation figures in the United States for the month of November. The market was reassured to see disinflation confirmed for the third consecutive month according to the consumer price index in the USA. Let us all the same keep in mind that the annual growth of the price system still exceeds 7% and that the objective of the Central Bank is to reduce the inflation rate to 2%.
The FED also unveiled a new monetary policy decision on Wednesday evening, increasing from 4% to 4.5% the interest rate of its fed funds and remembering that interest rates will remain around 5% for several months the time to definitively break the rise in prices.
The main uncertainty for the year 2023 is whether rates kept so high for several months will not end up triggering an economic recession. How would the crypto market behave in such an economic context? The answer is not obvious, at least it cannot be argued seriously because in the young life of cryptocurrencies there have only been two major recessions and two occurrences are not sufficient to deduce consequences.
In all cases, the dominant fundamental theme for the crypto market currently remains the financial strength of centralized platforms and this week it was Binance that brought excitement to investors by suspending USDC stablecoin withdrawals for a few hours. In the short term, it is imperative that withdrawals of funds from Binance cease and reverse into deposits to restore a level of immediate confidence.
Despite all of this bearish fundamental data for the crypto market, the price of Bitcoin (BTC) is still trying to stabilize, thereby preserving the potential bullish divergence pattern between price and momentum (represented below by the technical indicator RSI) medium term.
Graph showing the drawdown in % of the bitcoin price since its old historical high
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Bitcoin, the technical choice is long overdue despite the rebound in volatility
Let’s come back to the technical considerations, as we are close to the end of this busy week in terms of fundamentals. The price of bitcoin remains anchored in bear market as long as it is not able to cross with high volume technical resistance at $18/19K. This is still the graphical boundary between continuation of the downtrend and validation of a long-term low.
I have selected a chart below with the Bitcoin Rainbow indicator which highlights the role of this chartist resistance. If the market manages to cross it, it would then propose a reintegration of the lower limit of the Rainbow, which would be a bear market end signal (in the inverse image of the bearish reintegrations in 2011 and 2014). As these lines are written, this signal is still pending.
Chart that exposes the Bitcoin Rainbow indicator with the price of bitcoin (black curve)
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Vincent Ganne is a market strategist, technical analyst, trainer on the stock market and speaker on BFM Business. With a long experience in the field of analysis, he offers a global approach to financial markets. Both from a macroeconomic point of view and from a microeconomic point of view. Vincent Ganne also uses many aspects of chart analysis with the aim of forecasting trends in financial assets over the medium and long term.
Vincent Gane
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