Global financial, stock, and crypto markets, including Bitcoin, experienced massive volatility on Jan. 10 after rumors of a four-fold rate hike by the US Federal Reserve this year 2022, triggering a sell-off and 10-year US yields -Government bonds sent up 1.8% shortly.

Data from TradingView shows that the sell-off caused BTC to break the $ 42,000 support and lower the price to $ 39,660 before buyers entered the market.

BTC Price Chart – 1 Day | Source: TradingView

Here’s what analysts say about the recent drop in BTC, and what might happen next, as they watch the end of the Fed’s easing monetary policy affect the risky asset economy.

Shrinking money supply sends out a bad signal for Bitcoin

The Fed’s changing monetary policy poses significant challenges for riskier assets. However, according to analysts at Delphi Digital, the troubles that BTC and the crypto market are facing are more related to “tight liquidity conditions and increased market volatility” than to the rise in interest rates.

According to Delphi Digital, “the macro trends that helped drive BTC and crypto assets to new highs in the past 12 to 18 months have been reversed”. The analysts also noted that global M2 supply peaked near March 2021 and has since declined.

BTC price and global M2 offer | Source: Delphi Digital

M2 supply peaked around the same time that Bitcoin hit its all-time high in early 2021, followed by a correction below $ 30,000.

Despite the resurgence of BTC in late 2021, which hit new highs again in November at $ 68,789, the ongoing decline in M2 supply took its toll on the market, prompting the Fed to accelerate its rate hike.

Delphi Digital says:

“The move away from excess liquidity and favorable monetary conditions is the headwind that we have highlighted in recent months. At the moment it looks like this trend is getting closer. “

The discussion about rate hikes has also breathed new life into the USD. Delphi Digital also determined that this event would not be beneficial for assets like BTC, which tend to reverse against the USD.

“We continue to emphasize the importance of the US dollar in determining the direction of global markets, especially for asset classes tied to the currency weakness narrative.”

BTC / USD and DXY (reverse) indicators | Source: Delphi Digital

Good buying opportunity

Analyst Resolute has released an analytical chart of the current structure of BTC, highlighting a 42.5% decline from its November high.

“The market has formed a double bottom from the September 2020 low. BTC is currently trading below the 200 EMA on the 2-day chart, which used to be a good buying opportunity.”

BTC Price Chart – 2 Days | Source: TradingView

Resolute’s comment was picked up by trader Michaël van de Poppe, who posted a tweet suggesting that he would prefer to go long rather than short.

I’d rather be long here than short #Bitcoin. pic.twitter.com/QUc8n58b8K

– Michaël van de Poppe (@CryptoMichNL) January 10, 2022

The total crypto market cap is $ 1.192 trillion and the dominance of bitcoin is 40.9%.

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