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Breaking News: Coinbase Confirms DOJ Investigation Following Major Security Incident

Bitcoin Keeps Bleeding And Nears $40K, 4 Scenarios For Q1 2022

Reynaldo Marquez
Reynaldo Marquez
1 year ago
2 mins read
Picture of gold bitcoin on top a circuit board

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Bitcoin starts yet another 2022 week in the red with a 2% loss in 24 hours and a 13.5% loss in 7 days. The benchmark crypto has been on a downtrend since the end of 2021 and could potentially dip further due to macroeconomic factors.

Related Reading | TA: Bitcoin Key Indicators Suggest A Strengthening Case For More Downsides

Bitcoin BTC BTCUSD
BTC trends to the downside in the 4-hour chart. Source: BTCUSD Tradingview

At least, the above seems to correspond with the general sentiment in the market. The U.S. Federal Reserve is turning more hawkish due to a rise in inflation metrics, hitting new highs for the first time in 40 years.

Thus, turning potential price expectations for Bitcoin bearish as many believe risk assets will suffer in the short term from a shift in the FED’s monetary policy. Economist Alex Krüger recently presented a thesis in favor of the bulls. Via Twitter he said:

This has been extraordinarily bearish due to the speed of the Fed’s turnaround. Raising rates or tapering quantitative easing (QE) should not be bearish enough to change the upwards trend across assets.

The economist claims the recent price action to the downside has been triggered not just by the FED’s intention to modify its policies in light of the rise in inflation metrics, but mostly due to the speed in its decision.

In a short period, the U.S. financial institution changed its position from no interest rates hike to several rate hikes planned for 2022, a reduction in its asset purchase program, and balance sheet normalization. The latter is the most bearish for global markets.

To normalize its balance sheet, the FED would begin a Quantitative Tightening (QT) program which could lead it to sell around $50 billion worth of assets every month. Krüger added the following on the potential implications for the crypto market:

Simple. Crypto assets are at the furthest end of the risk curve. Just as they benefited from extraoridnarily lax monetary policy, they suffer from unexpectedly tight monetary policy, as money shifts away into safer asset classes.

What’s Bitcoin Fate As FED Turns Hawkish?

Under these conditions, Krüger believes Bitcoin could follow the following scenarios in the short term and through the first months of 2022. Depending on the upcoming CPI metrics, to be published this week, BTC’s price could react with a bounce or with a retest of 2021 major support at the lows of $30,000.

A high CPI would trigger the latter, a low the former, but there is a higher chance that Bitcoin could stay in its current range with another attempt to reclaim the mid area around its current levels. This would put BTC’s price close to $45,000 in the short term, but with more uncertainty for Q2, 2022.

Related Reading | Why Bitcoin Could Frustrate Bulls And Bears In 2022

As of press time, BTC took another sweep at the lows and re-visited the $39,000 levels only to quickly bounce into $41,000. Remains to be seen if this price action will be sustainable or if Bitcoin would return to lower levels. In any case, 2022 will be a year full of surprises.

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Reynaldo Marquez
Reynaldo Marquez

Reynaldo Marquez

A literature major, Reynaldo Márquez has been deeply immersed in the crypto industry since 2017. His journey began with translating articles for various crypto news outlets, a role he took on with zeal. In 2018, amidst a challenging market, he embraced his first writing assignment, demonstrating his unwavering commitment to the nascent industry and the promise of change it bears for many people worldwide.
In March 2021, he joined the prestigious crypto news outlet NewsBTC and Bitcoinist, where he not only reported on the latest crypto news but also had the privilege of interviewing some of the industry's most influential figures. A year later, his dedication and hard work were recognized, and he was promoted to Managing Editor, a position he currently holds with pride.
He believes in honesty, good communication, hard work, and the power of cryptocurrency and its potential to transform people's lives, especially those alienated by the legacy financial system. Born in 1992 in Venezuela, Reynaldo is familiar with how governments and central banks can negatively affect people, their everyday lives, and their futures by creating inflation and erasing their hopes for a better future. Thus, like many Venezuelans, he embraced this new technology to help him and his family navigate difficult times.
In another life, Reynaldo would have pursued a career as an investigator, most likely tracking down the origins of the Cyberpunk movement with the publication of William Gibson’s ‘Neuromancer.’ The intersection between fiction and reality, with the materialization of Bitcoin in 2009, would have allowed him to dive deep into the crypto sphere as something more than a financial phenomenon but also a cultural shift in society that was brewing since the XX century, and maybe even sooner, in the XIX century with the publication of Henry David Thoreau’s ‘Civil Disobedience.’
But that’s for another life. In this one, Reynaldo has been trading to improve his trading skills. Since 2023, he has been trying to learn Python to create successful strategies and find ways to execute them. It is a difficult task, which continues to keep him busy today and will most likely continue to keep him busy in the near and long term.
In his free time, he enjoys lifting heavy objects, reading, watching movies, and listening to his favorite music. Some of his favorite authors are Walt Whitman, William Faulkner, Allen Ginsberg, James Baldwin, Raymond Carver, Ray Bradbury, George Orwell, Mario Vargas Llosa, Reinaldo Arenas, Rafael Cadenas, and many others. Lately, he has been primarily interested in reading about dystopic societies, a topic that deeply resonates with the crypto industry.
Since 2023, he has lived in Spain with his wife. He loves the weather, the food, and the people and their culture. They both expect to travel much more within the country they now call home and beyond its border. He hopes to retire with his wife, maybe in a quiet place near a beach, but most likely in a city close to a library and a university with his kids and, hopefully, grandkids.

Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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