After a week trending to the downside, with a 16.1% loss, Bitcoin could retest the lows of its current levels. The benchmark cryptocurrency took another dive as the U.S. published new inflation metrics (Consumer Price Index), standing at an almost 40-year record with a 6.8% in November alone.
Inflation has been one of Bitcoin’s bullish factors since 2020 but could become a tailwind in a short time. In that sense, the downside volatility was expected, as the rising inflation could force the U.S. Federal Reserve and its Chairman Jerome Powell to fastest tapering at their asset purchase policy.
This poses an obstacle for risk assets and the global stock market. In addition to that, macro-economic factors are playing against Bitcoin with the potential default of Chinese real state firm Evergrande.
This company’s failure to honor its debt could trigger a domino effect across global markets and cause more downside for BTC’s price and the crypto industry.
According to Jarvis Labs’ analyst Ben Lilly, the real date to watch will take place next week when Powell will address the new inflation metric. Lilly bets on a “no-effect” on the markets as traders price in their expectations.
The analyst also pointed out the yield inversion in the Eurodollar futures market, as seen below. Ben Lilly claims this indicates that investors are expecting the FED to begin tapering soon, and even to do so without disclosing it to the public. The analyst said:
A simple way to think of this (the Eurodollar futures market) is when the Federal Reserve will end their attempt at tapering. And based upon current expectations, the market thinks the Fed will hit this moment earlier and earlier as each day passes.
Bitcoin Has Run Out Of Gas?
This all poses a threat for more appreciation, but Bitcoin could still recover its losses. In the short term, Jarvis Labs’ analyst believes the benchmark cryptocurrency will stay rangebound as bulls regain strength following last week’s crash.
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BTC’s current price action, as Lilly pointed out, it’s typical after large movements. In the Bitcoin Futures Market, Open Interest has trended to the downside with its underlying asset, getting closer to levels last seen in May and June, when BTC’s returned to its yearly-open near $30,000.
Long-term holders will be able to benefit from this situation, as BTC’s price remains at appealing levels. This situation could hold until the end of December 2021 and the beginning of 2022. Ben Lilly added the following:
What this tells us is we can expect to stay in this trading range until at least the end of the month. Why that timeline? Because the largest open interest in terms of open contracts is December 31st. Right now there is nearly 120k BTC in open interest, no expiration beforehand exceeds 20k of OI, a sign of how much attention the market is placing on this date.