Q4 is around the block
4 min read

Q4 is around the block

B21 Crypto. We help you stomach cryptoassets.

Cryptic ball: there's a lot of fear out there.

The expected end-of-month and end-of-quarter volatility is here. Bitcoin and ether fell up to 8% and 12% from Monday's top and are again testing dangerous waters. The global stock markets are also tumbling, with Tuesday marking the highest drop in the S&P 500 since May and  Nasdaq's worst dump since March. The move followed remarks from Jerome Powell, chair of the Fed, who said "inflation is elevated" and would remain so for some months. Why did this spook the markets?

Because the Fed will be more prone to pull back its economic stimulus program, a matter also known as tapering, if inflation is high. And it's the Fed that has been propping up equities and other assets in North America, thus allowing investors to feel like they can risk more - which consequently also benefits bitcoin and the like. Now the question is if Europe's natural gas crisis, which is also pushing oil prices higher, will accelerate tapering, as high energy prices make inflation worse.

Chart art: but we had similar action in 2017.

Credit goes to @edwardmorra_btc for highlighting this uncanny fractal. Note that, if we look at BTC, the orange coin is not repeating 2017 - at least on the same pace. It's moving rather slowly and that may upset investors.

Market musings: still, fear makes people irrational.

To add to this worrisome quarterly close, the US dollar is also appreciating against other global currencies, with the DXY (a dollar index) having just reached a new yearly high. Typically, this index rises as stock markets pull back, due to its safe-haven status. In other words, it signals an increased demand for dollars because investors sell their assets for this reserve currency. But should you panic?

Of course not. While we believe volatility over the next days and into the weekend can be brutal, and bitcoin could even test $39k again - which would crash all alts - our thesis for Q4 remains as bullish as it was. And it would only change in case the Fed was fine with a global stock market dump for Christmas - which we feel it isn't. That's a possibility we'll closely monitor, but for now it's time to enjoy the fear.

Visual block: and everyone is expecting a dip soon.

Options traders, both on CME and Deribit, are heavily betting on a dip too, given the much higher volume for puts than for calls. Remember puts are akin to short selling.

Three things: so be smart about your trades.

Tweet tip: and let's hope the US gets their sh*t together.

It's all up to Biden to decide.

Meme moment: or else we'll face a flood.

Courtesy of SwanBitcoin.

Twitter Spaces: join our next session.

This Friday, at 2 PM UTC, with Gabby Dizon, co-founder of YGG.

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.