The cryptocurrency market is showing signs of recovery this week. After bitcoin tested the support of $45,000 on Monday, the initiative passed to the buyers, who managed to return the rate above $48,000 again. The change of the bitcoin trend allowed the optimists to talk again about the resumption of the upward trend, the goal of which should be the resistance of $100,000. Meanwhile the objective estimation of the general market conditions signals about the opposite. Because the news background did not change, the current recovery of bitcoin looks more like a corrective dynamic, which may be followed by another wave of sales.
The market will continue to come under pressure from recent comments from Gary Gensler, head of the U.S. Securities and Exchange Commission (SEC), who said that since cryptocurrency exchanges have direct access to customer funds, investors need serious protection.
Stablecoins may become a useful part of the financial system
The official’s rhetoric was interpreted by the market as an intention to tighten regulation of cryptocurrency exchanges. Later, this topic was developed by US Federal Reserve Chairman Jerome Powell, who reiterated the need for the earliest possible development of rules for the circulation of stabelcoins. According to the comments of the head of the U.S. regulator, stabelcoins may become a useful part of the financial system, but only if they are subject to the same rules. It is worth noting that the negative impact on the bitcoin from the U.S. Central Bank is due not only to the rhetoric of its head, but also the actual actions of the regulator to tighten monetary policy. Recall that following last week’s Fed meeting, the bank’s management decided to take a more proactive stance in the fight against inflation. For this purpose, the Fed intends to accelerate the reduction of the national quantitative easing program so as to complete it completely in March 2022. In addition, voting members of the Fed have allowed the possibility of three key interest rate hikes in the new year, while a quarter ago most of them saw the feasibility of only one. Accelerating the pace of reduction of the bond purchase program, coupled with a high probability of the first rate hike as early as the first quarter of 2022 will strengthen the position of the U.S. currency against all risk assets, including bitco.
Covid-19 adds additional negativity to financial markets
Worsening epidemiological background in the world will also add additional negativity to financial markets. New restrictions have already been imposed in Europe to stop the spread of the Omicron strain, while representatives from health ministries around the world predict that the new strain could create an even tenser situation in the coming weeks. U.S. Chief Medical Officer of Health Anthony Fauci said Sunday that he expects a record number of COVID-19 cases this winter and urged people to get vaccinated. The Omicron strain has already been detected in 90 countries, and the number of cases of contact infection with it is doubling every one and a half to three days. In this background, market participants prefer not to take risks and direct investment flows to protective assets. Taking into account, BTC/USD pair still has a potential to go down to $30,000.