Macroeconomic aspects of the great BTC recovery
No, this is not an extensive macroeconomics guide for understanding the future of Bitcoin in 2022. This is our view of the situation and possible aspects of getting out of it.
In general, we are at a turning point: according to the data by Coinmarketrate.com, The BTC has started its recovery, the fear index has reached its maximum, and several indicators signal that the bottom has been reached.
The macroeconomic situation is what we know (and don’t know) about the future of Bitcoin. Regardless of the bizarre theories of a significant part of the world’s press, Bitcoin is, in fact, a financial asset and therefore reacts to macroeconomic determinants that also excite the stock market.
Nasdaq – Worst start since 2000
Suffice it to say that NASDAQ, in parallel with the great collapse of the cryptocurrency world, had the worst opening of the year since 2000. The parallel, which was disputed by some analysts when it was first published, is also becoming increasingly meaningful today in light of what is happening in the United States and other advanced economies.
If we had followed the textbooks, we would have observed a favorable situation for Bitcoin, which in any case is an anti-inflationary asset. However, the situation is more complicated here. Inflation is out of control, and central banks (especially the Fed) have already taken measures to contain it.
The tools that central banks usually use are raising interest rates and reducing sovereign debt purchase programs. And the announcements concerning these two issues have become one of the main culprits of what actually happened in the cryptocurrency market.
Goldman Sachs recently stated that, most likely, in each quarter of 2022, we expect an increase in US rates. This would be the proverbial horse medicine for inflation, the expectation of which has already had a significant impact on risky assets. At the beginning of the year, the NASDAQ fell, as did Bitcoin. Bad news? Not really, because the markets have already made a discount.
That is, a reduction up to the cancellation of sovereign debt purchase programs. This is a move aimed at monetary expansion, and therefore it has contributed to significant growth in both the equity and cryptocurrency sectors during 2021. Everyone expected a decline, although the Fed’s premature statement is partly to blame for the recent downturn.
However, there is little cause for concern here either, since BTC, Ethereum, and other major cryptocurrencies have already largely lost their positions, but have begun to return them.
Macro problems of the BTC in 2022
There are other issues that must be taken into account in relation to the economy as a whole. No, we are not talking about the future of miners who have already provided enough evidence that they are relatively liquid, and therefore can move to other countries when conditions are no longer suitable.
We are talking about the economic recovery that seems to be taking place now (despite the fourth wave) and, therefore, a solid base that allows the main central banks to restrain monetary expansion and inflation.
The short-term future will largely depend on the “hawkish” or “dovish” behavior of the Fed and, to a lesser extent, the ECB. Doves or hawks will be able to signal a more or less strong recovery in a sector that, at least for now, seems to have found the bottom.
Mike Novogratz thinks so, as do many other experts who note, for example, that the RSI indicator is at the same levels that were reached at the bottom of the last few collapses. Therefore, the sluggish morning European session should not have caused much concern on the eve of the recovery that everyone was waiting for. And it all started. And if the BTC was falling before thanks to the Fed, now it is recovering thanks to it.
Jerome Powell: “Yes” to stablecoins
We return to one of the most important aspects of the long speech by Federal Reserve Chairman Jerome Powell. And we want to do this with respect to the two points that most closely relate to cryptocurrencies.
We are talking about a possible turnaround regarding stable coins, as well as a report that, according to Powell, is ready to be submitted to Congress. Two fundamental points for the future of cryptocurrencies, also taking into account the great impact that US decisions have on the whole world.
These are two pieces of news, at least for now, that are very favorable for the sector.
And so, many believe that Powell is a cryptocurrency pigeon. But is this really the case?
Powell’s statements mainly related to the world of interest rates and tapering, which are important operations for the Federal Reserve in an attempt to contain inflation. These are issues that are of great importance to the Bitcoin world, but which require a separate detailed discussion, so let’s leave more room for the more refined crypto topics touched upon by Powell.
A ready-made report on the world of cryptocurrencies
This is what Congress has asked for, and what it will soon get its hands on. The situation is complicated. The markets are well aware of the hostile position of the US Democratic Party led by Biden, and some of the most representative congressmen of this party are now engaged in an irreconcilable struggle against the world of cryptocurrencies and Bitcoin in particular.
Why the appearance of the report may be good news for the industry? Because Powell has repeatedly shown that he is not as opposed to cryptocurrencies as one might expect, and has been more than active in the direction of regulation so that the US does not miss the innovation train.
This would be a much more “dovish” attitude, i.e. “dovish” rather than “hawkish” than the prevailing sentiment in the Democratic Party. And this can lead, even using internal friction, to much more favorable conditions for all players in the sector, from traders and investors, to exchanges and cryptocurrency miners.
Stablecoin? Yes, please
However, perhaps even fewer people expected Jerome Powell to be clearly loyal to the world of stablecoins. According to the head of the Fed, they can even coexist with the digital dollar, which will eventually be adopted in the United States.
This answer actually corresponds to what Powell already hinted at a few weeks ago, but now, before Congress, it takes on a completely different scale. Of course, they are talking about regulation again, but this may be a much less cruel choice than the ban that some people have proposed.
In a word, more good news for the cryptocurrency world is coming from the USA. The news that brought Bitcoin back above $43,000 is far enough away from the dangerous level below 40,000.
Whether 2022 can be a year of great growth for the military-technical complex and, consequently, for the industry as a whole – we will see.