U.S Equity Futures Flash Red Pointing to a Tough U.S Session for Bitcoin (BTC)
The bearish trend for Bitcoin (BTC) and the broader market has continued through this morning. While avoiding the wrath of the U.S Congress on Thursday, market sentiment towards FED monetary policy has done the damage.
On Thursday, a U.S Congress subcommittee held a hearing on cryptos and crypto mining. While a political agenda was evident, no clear plans for cryptos and crypto mining were drawn.
This was in stark contrast to comments made by SEC Chair Gary Gensler this week. Ahead of the hearing, news had hit the wires of Gensler warning of a crackdown on digital assets this year. He added that the additional scrutiny was crucial to give crypto investors levels of protection seen across other assets.
The SEC Chair’s comments follow a wave of calls for a global crypto regulatory framework.
Crypto Takes a Hit from Both Sides, the FED and Regulators
Back in 2018, Bitcoin and the broader crypto market suffered at the hands of regulators. Looking at the Bitcoin slide from November’s ATH $68,979, a similar trend is beginning to form at the start of 2021.
Bitcoin slumped by 84% from a late 2017 high to its most recent low of $3,170 in December 2018. In the current reversal, Bitcoin is down 44% from November’s ATH to this morning’s low of $38,329.
When considering the fact that the FED only changed its view on inflation in early December, the pullback had already commenced. The combination of a more aggressive move towards monetary policy normalization and increased regulatory scrutiny is a double blow for Bitcoin and the broader market.
Crypto Interconnectedness with U.S Equity Markets
The crypto market is not the only asset class at the mercy of the FED and this has also impacted the appetite for cryptos.
Looking at the NASDAQ, the index is down 9.4% from 10th November 2021 to Thursday’s close. While a far more modest decline, the NASDAQ is already in corrective territory.
At the time of writing, the NASDAQ mini was down by 96.5 points. Another heavy sell-off would add further pressure on Bitcoin and the broader crypto market through the U.S session.
Dip buyers going back into U.S equities and cryptos could ease the pain but they are not going to be able to change the narrative.
For consumers, the losses seen across riskier asset classes are a heavy blow. U.S mortgage rates are on the rise amidst a continued upswing in house prices. The U.S annual rate of inflation was at its highest since 1982 in December.
4-rate hikes by the FED to curb inflation would impact consumer disposable income and appetite for riskier assets including cryptos.
A marked shift in the stance of regulators and a FED assurance of no more than 3 rate hikes this year would ease the pain.
Bitcoin Price Action
At the time of writing, Bitcoin was down by 3.92% to $39,108. This morning’s pullback saw Bitcoin visit sub-$39,000 levels for the first time since early August 2021.
While finding support and moving back through to $39,000 levels was key this morning, a return to $41,500 would be needed.
A failure to move back through to $41,500 levels would bring sub-$39,000 back into play.
Elsewhere, Crypto.com Coin (CRO) was down by 13.07%, leading the broader market into the deep red.