Forex Analysis & Reviews: 16.01.2022 - Bitcoin: the only hope is...

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16.01.2022 11:54 AM

Bitcoin: the only hope is for the institutionalists.

The beginning of the year for bitcoin, as well as the end of the previous one, were not the best. From our point of view, this is not surprising, since the fundamental background remains far from the most favorable. We have already said that bitcoin began its decline around the time when it became clear to all market participants: The Fed has embarked on the path of tightening monetary policy. Therefore, we believe that bitcoin logically fell by $ 30,000 from its absolute highs. With each passing month, the amount of monetary injections into the economy from the Fed will only decrease and this process will not take much time. Already in March, the Fed plans to completely abandon monetary stimulus and start raising the rate. Therefore, bitcoin is losing its main growth factor over the last two years. Recall that two years ago, bitcoin began to rise in price from the $ 4,000 mark. During this time, it managed to grow by $ 66,000. Naturally, not least because of the huge amounts of money that central banks poured into the economy. Now the reverse process begins, when rates will rise, and excess liquidity will be withdrawn from the economy. Consequently, investments will decrease. Therefore, the cryptocurrency market may experience serious problems in 2022.

Bitcoin's hope is in inflation hedging.

We believe that only high inflation in the States (and not only) can help bitcoin at least not collapse by 80-90%, as it usually happens after the end of the "bullish" trend. The fact is that inflation in the States continues to remain high and this is the only factor that can continue to force investors to buy bitcoin. But for this inflation protection scheme to work, bitcoin must continue to grow in price. Otherwise, there is no special point in buying bitcoin. And now, as we have already said, the fundamental background is not the best, so few investors expect growth in 2022. According to various surveys, only 50% of investors expect growth from cryptocurrencies this year. At the same time, only 10 percent believe that bitcoin will be able to grow above $ 60,000 per coin. All this suggests that this growth factor can also be leveled. Separately, I would like to note that institutional and large investors may try to keep "bitcoin" from falling again. For example, last week bitcoin failed to gain a foothold below the important support of $ 40,746. But here it is completely unclear whether they will be able to redeem the entire volume of coins that will flow to cryptocurrency exchanges. And even if so, after a while, only large investors will own bitcoin, whose coins will lie on their wallets for years. The turnover of bitcoin will be minimal and the cryptocurrency will move further away from the status of "currency". It is already making not so many calculations. It performs an exclusive investment function.

On the 4-hour timeframe, the trend remains downward. Three times last week, the cryptocurrency failed to overcome the level of $ 40,746, so for now, we are talking about an upward correction. The descending trend line still signals that the fall may resume at any moment. The price at the moment could not even grow to the trend line, let alone overcome it. And overcoming the level of $ 40,746 will allow the cryptocurrency to continue moving south up to the level of $ 31,106.

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*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.