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It is Monday and the market is tanking again. This year has been long in terms of suffering since most crypto investors are punished over and over again by brutal sell-offs. Is this over or just the beginning and how can you still profit from these harsh market conditions?
The correlation between crypto and US stocks is still very high. The US inflation increased by 0,1 % in August which was higher than expected. Of course, inflation is still lower than in July 2022, but the key information is that it went higher compared to August last year.
This has lowered the expectations of many traders and investors. They were hoping that a lower inflation rate would indicate that the Fed could turn around and stop raising interest rates or even reverse its decisions.
Since the inflation increased, the possible end of Fed intervention is delayed and we have to deal with the fact that rate hikes will be a thing throughout 2022 as well as 2023. This lowers risk appetite and causes many investors to opt for cash rather than risk-on assets like cryptocurrencies and tech stocks among other things.
Powell will “pow” the market this week
To add insult to injury this week’s FOMC meeting will reveal how much pain the Fed is willing to inflict on the market. It is a common consensus among analysts that the Fed will opt for another 75 bps rate hike.
According to the CME Fed watch tool, there is a chance of about 18 % that the rate hike will be way higher and the Fed is going for a 100 bps. This is the reason why stocks started weak this Monday and since the correlation between stocks and crypto is still intact, Bitcoin, Ethereum, and most other cryptocurrencies took a bath in a sea of red.
It is important to understand that the market in its current state is only dealing with expectations. That being said, if the Fed is going for 75 bps we are getting bullish vibes this week, and if it’s going to be more than that we continue to dance with the bears.
Is there a way to profit from this situation?
Yes, of course, but it strongly depends on your personal time preference. Recently a lot of bullish stuff has happened. Ethereum has decreased its inflation rate to one-tenth before the Merge. Should the adoption continue, it could possibly become even deflationary as a long-term effect over the next few years.
Bitcoins hashrate is at an all-time high. The network is growing despite the debate about the environmental impact of mining. This has been the bullish indicator in the past and it is unlikely that the miners would continue to grow their business if they weren’t sure that Bitcoin would grow in terms of price over the next two years or so.
Buying Bitcoin and Ether at low prices is what made many people rich last year. But they didn’t start buying when the price was going up. They bought when everybody else was dumping and eventually the public interest in the topic was at an all-time low. One strategy many retail investors apply is the dollar cost average strategy. It is very hard if not impossible to catch the bottom and deploying capital over time usually beats any attempt of timing the market.
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The Fed raised the rates again – Bitcoin remains neutral
Yesterday the latest FOMC meeting ended with a press conference and good news. According to the CME Fed Watch Tool, there was an 18 % chance that the Fed is going to opt for a 100 bps rate hike. This time Jerome Powell did not “pow” the market and gave a press conference that revealed moderation, but also reminded everybody that the Fed is going to continue with its course. Why is the Bitcoin price flat and when will this bear market most likely going to end?
The SEC claims authority over Ethereum
After the Merge happened, reality snapped back in and to everybody’s surprise, the Security and Exchange Commission went against Ethereum. According to Gary Gensler, proof of stake brought Ethereum closer to the status of a security. It seems that Mr. Gensler isn’t finished quite yet with the world’s biggest smart contract platform. Why is the SEC claiming authority over Ethereum and is this even possible?
Ethereum is facing a supply shock just hours after the Merge
The Merge moved Ethereum from proof of work to proof of stake, and the main implication is that the Ethereum blockchain is becoming carbon-neutral. Today was the big day and so far, there have been no hiccups or fatal errors reported. This does not mean that we are out of the woods yet, but it looks pretty good, and chances are high that Ethereum can proceed with the rest of the items on its roadmap. Another factor that comes into play is the supply of Ether, the native currency of the Ethereum blockchain. Is ETH becoming scarce and how is the supply changing within hours after the Merge commenced?
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