The FOMC meeting led to much less volatility in bitcoin than many experts expected. The top cryptocurrency stayed above $20,000 per coin and continued to move in a tight range during and after the US central bank meeting.
The Federal Reserve, as expected, raised interest rates by 75 basis points. The FOMC statement said the Fed would "take into account cumulative tightening and lagging."
As a result, the markets reacted very mildly until Fed Chairman Jerome Powell's press conference began 30 minutes later. First, the DXY fell after the FOMC announcement and risky assets such as the S&P 500 and bitcoin surged in value. However, this did not last long.
During Powell's speech, there was a major shift in sentiment that turned the market upside down. DXY rose above 112 points, which led to lower prices for risky assets.
The long-awaited speech was generally rather empty. The chairman of the US central bank tried his best not to give any information about the interest rate strategy for the coming months.
For every hawkish argument, he also made an opposite, dovish statement. However, the market treated Powell's statements as hawkish.
Two key announcements likely shocked the market. On the one hand, Powell said that "the final level of interest rates will be higher than previously expected." This is an extremely aggressive comment that ended the rally and sent stocks down. Cryptocurrency and bitcoin followed suit, though not as dramatically.
On the other hand, the Fed chairman was keen to emphasize that the central bank needs to study the data, wait and see. He stressed several times that it would be "very premature" to think or talk about pausing rate hikes.
Focus shifts to inflation report
Powell's latest statement can be interpreted to mean that inflation indicators - the consumer price index (CPI) and producer price index (PPI), which will be released again on November 10, will become very important for financial markets.
If inflation turns out to be higher than expected, all markets are likely to collapse. If, on the other hand, there is a rebound and a significant decline in inflation, this could trigger the start of a new recovery rally.
On November 10, the focus may be on the core CPI (change in the cost of goods and services, excluding food and energy) and the PPI producer price index. During previous crises, such as the 1970s, 1980s, and 2008, the PPI has been a leading trend indicator.
The PPI has always fallen before the CPI, including the baseline, because manufacturers communicate their new prices to their customers with a delay in time. The core CPI has continued to rise since July, leading the Fed to fear that inflation could take hold.
However, at the same time, producer prices (PPI) were already falling. Thus, it is likely that the core consumer price index will show a decline.
This, in turn, could lead financial markets to believe that Powell might slow down in his next speech on Dec. 14. As always, the market will try to get ahead of the Fed.
In that sense, November 10 could be an extremely important day for risky assets, even though the next FOMC meeting is over a month away.
Bitcoin seller exhaustion hits 4-year low
Meanwhile, on-chain data shows that bitcoin sellers may not have capitulated enough, but current trends are "typical" of the end of a bear market.
Selling behavior suggests a macro price bottom is forming, according to data from network analytics firm Glassnode.
In a final hint that the last bitcoin bear market is coming to an end, Glassnode revealed that the network is currently experiencing a "perfect storm" of low volatility and high network losses.
Thus, the seller's exhaustion constant, calculated from one month's rolling volatility and network transaction profitability, is at its own long-term low.
Such lows are rare, having previously occurred only seven times. In six of those cases, volatility was on the rise, which meant that bitcoin could soon end its bearish trend.
"Bitcoin seller exhaustion constant recorded the lowest value since November 2018," commented Glassnode.
In a subsequent discussion, one of the network analysts called the data "typical" of bear markets, adding that such levels occur "near the lows."
The seller's exhaustion constant was originally created by ARK Invest and David Puell, responsible for the popular Puell Multiple indicator.
This metric measures whether two factors match. In particular, the combination of low volatility and high losses is associated with capitulation and a drop in the price of BTC.
Additional data on unspent exit transactions (UTXO), however, shows that the current levels of BTC moving down the chain at a loss are not in line with bear market all-time lows.
As of October 29, the latest date for which statistics are available, 75% of UTXOs were in profit, in sharp contrast to the end of 2018, when this figure fell well below 50%.
Bitcoin will not reach $100,000
While the market is waiting for inflation data, and network analysts are finding more and more signs that the main cryptocurrency has reached the bottom of a bearish cycle, I suggest looking at opinions on the long-term outlook for the main cryptocurrency.
Recently, economist Mohamed El-Erian shared his views on the potential future of BTC. According to him, the main cryptocurrency will become the world's reserve currency, but its price will not reach the level of $100,000.
In addition, El-Erian believes that the crypto sector will scale during the prevailing crypto winter. He noted that the crypto industry will also become an important sector of payment systems.
El-Erian noted that BTC's innovative technology project reached its peak when the price rose to $70,000 in November 2021. Then the growth of BTC was facilitated by the huge enthusiasm of investors, overproduction and excessive consumption.
As for the challenges from cryptocurrency regulators, El-Erian believes that bitcoin and the major altcoins will overcome them. He stated that productivity cannot go down with the right rules. But the likelihood of BTC hitting the $100K mark or gaining widespread institutional acceptance is still uncertain.
The chief economist also noted that the promotion of BTC was affected by the crypto-winter and unfavorable macroeconomic conditions. But, fortunately, there is a gradual strengthening in the crypto ecosystem now.
Long-term forecasts of BTC supporters
The forecast for bitcoin to rise to $100,000 per token is a rather important milestone, which was called by many adherents of the main cryptocurrency.
Michael Saylor believes that bitcoin will perform well in the future and approach $1 million. According to him, the token is different from others in that no other network can match its level of security.
In October, Senior Commodity Strategist at Bloomberg Intelligence Mike Mcglone predicted that BTC would hit $100k in 5-10 years.
Some predictions have also been made by people outside the crypto industry. Zach Pandle, co-founder of Global FX at Goldman Sachs, gave a similar prediction for the top cryptocurrency.
