Everything that happened in the financial market recently brought both learning opportunities and worrying situations. It looked so dramatic to me when I got the Fed news on my phone while I was getting ready to leave the house yesterday, as if it was a movie premiere or something.
The Fed lowered the interest rates by 0.25 percentage point, making the new target rate 3.75 percent. Bitcoin prices began free-falling as Powell spoke. The price of the cryptocurrency did drop as low as $109k during his speech. There was another market slump after the end of Powell's speaking that resulted in more than $300 billion in assets lost in an instant.
I started thinking of past disruptions in the market that had similar characteristics. The price of Bitcoin had an initial decline that made me feel unwell, but the market recovered to reach $111k to $112k during the day. The conditions in the current market have proven Bitcoin's ability to withstand challenges.
Powell indicated that the probability of interest rate cuts in December is unlikely, and, generally speaking, his tone was optimistic rather than worrisome. It was from that detail of his speech that the market rebounded. How markets respond to it will come from the interpretation set upon data by people.
Furthermore, the Fed plans to stop the balance sheet reduction. The new changes take effect from December 1. I see this as a gradual way of improving liquidity in the system. It might not have an immediate effect, but it is indeed a step in the right direction.
I have been in many such situations before, and from experience, I will say things are not so bad. The Fed announcement feel like a weight off the shoulder in an economic sense. Events coming in November shows promising signs that worth paying attention to.
On-chain analytics point out that the behavior of institutional investors adds color to this. Michael Saylor's long-standing belief in Bitcoin's future seems to get firmer by the day. Major holders have been accumulating more Bitcoin after the downtrend in October. These whales holds between 10k to 100k in their bags, and they have added more than 45k BTC to their bags during October. This shows that there's no panic but a strong belief in the asset.
I had also noticed this buying pattern before all the previous recoveries. This is big money taking positions to re-buy. Bitcoin May Rally to $110,000 to fill Futures Gaps: This adjustment happens routinely after Fed meetings.
Historical precedent also supports this view. Bitcoin usually consolidates shortly after such a meeting before reaching new highs within days or weeks. In other words, even with volatility, the conditions suggest a path that is very positive.
Interest rates have fallen, monetary tightening has softened, and institutional buying is now underway. I've been on many phases, not all of them linear. Everything takes time or perspective for rain or shine. This development calls for more discussion, and anybody is free to share their take, so others may be able to understand it more clearly.
Posted Using INLEO