Market situation

Bitcoin price fell to around $ 47,000 last day after returning to around $ 50,000. Altcoins also fell in favor of BTC and the market was almost in the red.

According to the Fear and Greed Index, market sentiment is at an extreme level of fear. The number of future orders in the market has not increased after the correction at the beginning of the month by BTC. BTC price corrected without long press. The funding rate is also balanced and does not tend towards an upward or downward trend.

The Bitcoin win rate has dropped to 71%. As for the amount of Bitcoin that has been withdrawn and deposited on the exchange in the past few days, there is no clear trend. There are days with more withdrawals and days with more deposits. The amount of BTC on the exchanges is moving sideways.

Investors fear the Fed will hike rates

The US financial market also has some influence on the crypto market. The market situation awaits announcements from the Fed in the current meeting on interest rates. The Federal Reserve could decide to accelerate the end of its bond-buying program, signaling that it is expected to start rate hikes from 2022. If she decides to cut back on her bond purchases quickly, she could start raising rates sooner.

Investors will be keeping a close eye on the Fed’s new rate forecasts and are cautious about rate hikes. The current US inflation rate is 6.8%. This is the highest inflation rate since 1982. In fact, the inflation rate could be above the value of 6.8%.

Inflation comes from the market in relation to the flow of money and supply – demand in the market. The Fed can influence inflation by easing or tightening the cash flow into the market. The instrument used by the Fed is to raise and lower interest rates. If the Fed hikes rates, it will tighten cash flow, making it harder for money to enter the market. Conversely, money can be borrowed more easily when the Fed cuts interest rates. At that point in time, the increased cash flow into the market will lead to rising raw material prices.

At this meeting, the Fed is expected to cut its bond purchases and possibly raise rates soon. The market often reacts to concerns about rate hikes causing it to pull money out of assets. The stock market also fell slightly over the course of the day. This could also be the reason for the correction in crypto prices.

James Gorman, CEO of Morgan Stanley, told CNBC on Monday that the Fed should hike rates soon to combat a future downturn. Mr Gorman said a rate hike would stabilize the economy, even if it could upset the financial markets for a short period of time. And hike rates soon, if there is a problem the Fed has time to cut them and save the economy.

Bitcoin is in the accumulation phase

Dylan LeClair, an on-chain analyst, also shares his views on the current Bitcoin situation. He shared how he calculates Bitcoin’s actual capitalization based on the price of the last time Bitcoin moved instead of the current capitalization times the total amount of BTC in the market.

By his calculation, BTC’s market capitalization on December 11th is conventionally over $ 912 billion. If you put it that way, the real market cap of BTC is $ 461.8 billion.

Every time the price of BTC rises sharply, the market capitalization actually rises very quickly (pink line). Capitalization rose because a large amount of old BTC had moved and there was an influx of newbies to the market. The growth in BTC capitalization from May to December corresponds to the capitalization of all BTC as of January 14, 2018.

At this point, BTC capitalization began to penetrate the yellow zone and move sideways, showing that BTC is in an accumulation phase. He believes that BTC price will pile up at least until next year before entering a bull phase.

Based on the correlation between Bitcoin’s normal cap and true capitalization, Dylan suggested that the best time to buy with an accumulation of BTC is MVRV below 1. This means that this accumulation could correct BTC lower before it goes up.

One more thing: by the end of the season, there will be signs that perennial BTC is moving towards profit-taking. At the same time, the CDD index will rise to a high. For now, however, that CDD is still at a low level which means we don’t see any signs of the end of the bull season.

Coinshare statistics show that major investors continued to invest a total of $ 87.8 million last week. In which some funds are withdrawing from the market and others continue to invest more heavily. Multi-asset investment products Solana, Tron, and Multi-Asset bucked the trend with inflows of $ 19 million, $ 17 million and $ 15 million, respectively.

Bloomberg was also positive about the market. According to a recent report, Bloomberg says Bitcoin has made new advances and has entered the gold market. Mutual funds have gradually switched some of their mutual funds from gold to BTC and ETH. BTC has gradually evolved into a financial instrument and store of value.

The Fed is also mentioned because Bloomberg believes that the Fed’s interest rate policy will affect both traditional financial markets and crypto in the short term. In the medium term, crypto will be a market that will grab investors’ attention and outperform the stock market in the next year.

Bloomberg also values ​​ETH and is of interest to major investors. The report also emphasizes that this is a great platform for developing applications like Defi, Dapp, NFT, etc. While ETH has no limit, the fact that ETH has the current burning mechanism will help to significantly reduce the amount of ETH on the market.

In general, interest rate hikes can have short-term effects on BTC. In the long run, however, Bloomberg believes that rising interest rates will have no effect, in fact, help BTC truly become a store of value.

Some other information:

• The world’s first Bitcoin ETF in Canada – Purpose Bitcoin ETF – bought another $ 211.6 million in Bitcoin in December. The total amount of Bitcoin the fund holds now stands at a whopping 28,974 BTC.
• One of the largest banks in Europe, BBVA, has announced that it will expand its range of crypto trading services by adding Ethereum to its portfolio in addition to Bitcoin. BBVA Switzerland will also continue to expand its digital asset offering in the coming months. The bank has positioned itself as one of the leading services in the market on the path to crypto adoption.
• Germany’s largest savings bank, Sparkasse, plans to start a cryptocurrency service in 2022. This means that 50 million customers could enter the market for this new type of investment.
• TIME magazine has nominated Elon Musk for Person of the Year. Elon Musk also shared in an interview with this magazine that Bitcoin should be a store of value as he and Tesla also store BTC. As for Dogecoin, Elon believes it should be a means of payment.