Super not transitory
4 min read

Super not transitory

Cryptic ball: crypto is here to stay.

Yesterday's daily close at $57k failed to be as exciting as it could. But today bulls were charging again, bringing bitcoin to $59k and many alts towards new all-time highs (LUNA is up nearly 60% since Friday!). However, things changed this afternoon when the Fed's chair, Jerome Powell, came before the Senate Banking Committee for another hearing on the state of the US economy and to discuss the impact of Omicron, COVID's new variant, on monetary policy.

I've written about Powell and the impact of his statements on 12 of our posts already and the topic never gets old: any time the Fed's chair speaks is a good time to trade. Well, in the prepared statements released yesterday, it was mentioned that the Fed would use its tools to "both support the economy and prevent higher inflation". It seems most traders interpreted that as another sign that the central bank would resume its money printing business, but that wasn't the case.

And today Jerome surprisingly admitted that this inflation is not transitory and will likely only subside in the second half of 2022. To mitigate the pressure of higher prices on the budget's of American families, the Fed will discuss in its December 15th meeting whether or not to taper the asset-purchase program "a few months" sooner than expected, i.e. by March instead of June 2022. Now, you must be wondering what does this means for crypto, fellow readers?

On the one hand, and as also explained over the past months, this bull cycle has been mostly driven by institutional investors and not retail investors - i.e. the individuals who buy cryptoassets through apps like Coinbase and B21. Institutions are more affected by the Fed's policies as they are typically exposed to the wider market, which reacts to expectations around the economy's anticipated performance. On the other hand, traders like to trade potentially volatile news.

Note equities have bounced hard after the COVID slump in March 2020 due to the Fed's commitment to purchase bonds and mortgage-backed securities in its now popular quantitative easing program - which added liquidity to the real economy (and helped increase inflation) and, in turn, boosted stock prices. With its end, the markets are expecting less money trickling down until it eventually reaches people's pockets, and thus a halt in economic growth - meaning stonks can dump.

Both the S&P 500 and the Dow are down 3% to 5% since their all-time highs. But remember the tapering program isn't new and the Fed has been preparing the market for it for many months. As Alex Kr├╝ger says in today's Tweet Tip, as long as the global market doesn't crash hard this only means we'll go up in a slower and bumpier manner. That's also aligned with the supercycle hypothesis: i.e. this bull market will continue for longer than expected with some larger pullbacks like those we saw this summer. Now, let's see if December marks the start of one or not. For the moment, we're still stuck in the $52k to $64k range!

Chart art: ranges are here to stay.

Zooming out to see this year's three ranges that have defined bitcoin's price action. Remember bitcoin needs to conquer $60k asap or else we're stuck in the current downtrend.

Three things: super what?

Tweet tip: taper what?

This means more time stuck in ranges while shitcoins pump left and right.

Meme moment: always have a plan.

Just make sure you have a Plan L before resorting to Plan M.

B21 Card: and Yield Guild Games.

The first batch of YGG Founder's Card, in partnership with B21, has been sent out.

Get started: download the B21 Crypto app!

Subscribe to our newsletter
Follow us on Twitter @b21official
Follow us on Twitter
Join our Telegram group
Find us on Instagram
Watch us on Youtube
Legal Notice
Our newsletter offers opinions and insights from analysts in the cryptoasset space. It is not intended to be investment advice, and should not be treated as such. You must not rely on its information as an alternative to financial advice from a qualified professional. Without prejudice, we do not undertake or guarantee that its information is correct, complete or non-misleading; or that the use of guidance in the report will lead to any particular outcome or result.