Bitcoin Steadies Ahead of Fed

The latest moves in crypto markets, in context

January 25, 2022

Sponsored by

If you were forwarded this newsletter and would like to receive it, sign up here.

Good morning, and welcome to First Mover. Here's what's happening this morning:

Market Moves: Bitcoin steadies as two-day Fed meeting gets underway. The U.S. 2-year Treasury yield rises above 1%, signaling skepticism among bond traders that the U.S. central bank will back away from its hawkishness in the face of recent market weakness.
Technician's Take: Monday's high is the level to beat for ether bulls.

And check out the CoinDesk TV show "First Mover," hosted by Christine Lee, Emily Parker and Lawrence Lewitinn at 9:00 a.m. U.S. Eastern time. Today's show will feature guests:

Peter Brandt, founder, Factor Trading
Yossi Hasson, CEO, Metaversal
Alex Felix, chief investment officer, CoinFund

Today's newsletter was edited by Omkar Godbole.

Market Moves

The crypto market staged a brief recovery early Tuesday, with crypto market leader bitcoin maintaining late Monday's recovery rally above $36,000.

Several major cryptocurrencies rose as high as 12%, with Polkadot (DOT), Solana (SOL), and Cardano (ADA) among the biggest gainers, as CoinDesk's Shaurya Malwa reported.

Sellers look to be taking a breather ahead of this week's two-day, closed-door Federal Reserve meeting, where a concluding statement on Wednesday is expected to reveal growing consensus among policymakers to begin raising rates interest rates in March. While several Wall Street banks have penciled in at least four quarter-percentage-point hikes, the market for futures contracts on Fed funds has already priced in nearly five rate hikes for this year.

Bitcoin's price has nearly halved since mid-November, predominantly on fears of monetary-policy tightening. Thus, some investors anticipate a bounce following the Fed meeting unless the central bank signals more aggressive tightening than what's already baked in.

Bond traders disagree with popular narrative

A popular narrative on social media is that the Fed may get cold feet due to the recent stock market decline and could backtrack from its recent hawkish stance.

However, bond traders seem to disagree. The two-year Treasury yield, which mimics short-term rate hike expectations, remains steady at 12-month highs above 1%.

U.S. two-year yield (Source: TradingView)

Previous stock market sell-offs have seen bond traders price in a dovish Fed by sending the two-year yield lower. We aren't seeing a similar reaction this time.

That's perhaps a sign of bond traders being convinced that the Fed's primary goal is now inflation control, or they think the recent stock market drop is not enough to deter the central bank from raising rates.

So, while bitcoin and other asset prices could recovery after the Fed, prospects of renewed bull run look weak.

"As liquidity tightening is the trend, further market declines appear unavoidable in the future," Griffin Ardern, a volatility trader from Blofin, a crypto-asset management company, told CoinDesk in a Telegram chat.

Bitcoin-ether ratio rallies

The bitcoin-ether ratio rallied to the highest level in three months on Monday as adverse macroeconomic conditions unexpectedly took a bigger toll on the native token of Ethereum's blockchain.

The ratio climbed to 15 on Monday, hitting the highest since Oct. 25, a chart provided by TradingView shows. Bitcoin has consistently outshined ether over the past six weeks, evidenced by the ratio's 32% increase since Dec. 8.

Ether has declined 45% since then, amid heightened expectations of a U.S. Federal Reserve interest-rate increase. Bitcoin, despite being considered an inflation hedge and more sensitive to changes in borrowing costs in the traditional economy, has seen a more measured drop of 29%.

The price action counters the narrative that increased institutional participation in bitcoin has made it more vulnerable to macro factors.

Read the full story here: Bitcoin-Ether Ratio Hits 3-Month High, Friday's Close Pivotal

A Message from Grayscale

As the world's largest digital currency asset manager, Grayscale offers the world's largest Bitcoin investment vehicle, Grayscale® Bitcoin Trust (symbol: GBTC) -- a secure and convenient way for investors to gain exposure to Bitcoin right from their brokerage accounts.

In lieu of a spot Bitcoin ETF, GBTC is a great option for investors looking to diversify their portfolio into the most popular cryptocurrency.

Access Grayscale® Bitcoin Trust by typing symbol: GBTC into your brokerage account. Learn more here.

Crypto Prices

Bitcoin (BTC)

See the latest price here

Ether (ETH)

See the latest price here

The following are the biggest movers in the CoinDesk 20 digital assets over the past 24 hours:

Biggest Gainers:

Asset	Ticker	Returns	Sector
Cosmos	ATOM	+15.2%	Smart Contract Platform
Polkadot	DOT	+11.1%	Smart Contract Platform
Chainlink	LINK	+10.5%	Computing

Biggest Losers:

There are no losers in CoinDesk 20 today.

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.

A Message from Brave

Brave Wallet is the first secure crypto wallet built natively in a web3 browser. No extensions required.

Store, manage, and grow your portfolio, get NFT & multi-chain support. Even connect other wallets and DApps. All from the security of the best privacy browser on the market.

Whether you're new to crypto, or a seasoned pro, it's time to ditch those risky extensions. It's time to switch to Brave Wallet.

Download Brave today, and click the Wallet icon to get started.

Latest Headlines

"New Money" explores what it means to be part of the new "creator economy." We hear from pro athletes, celebrities and social media influencers who are on the cutting edge of interacting directly with fans and developing new ways to generate revenue from their own celebrity. Tune in every Wednesday at 1 p.m. ET.

Technician's Take

By Omkar Godbole

Monday's high is the level to beat for ether bulls

Ether's daily chart (Source: TradingView)

The long wick attached to Monday's candle indicates seller exhaustion and complements the oversold or under-30 reading on the relative strength index (RSI).

While the immediate bearish bias stands neutralised, a trend reversal needs a convincing UTC close above Monday's high of $2,543.

ICYMI

In case you missed it, here are the most recent episodes of "First Mover" on CoinDesk TV:

Crypto Market Lost $1.3T in 2 Months; What's Going On? White House Set to Release Government-Wide Strategy for Digital Assets

"First Mover" hosts are joined by Marc Lopresti, managing director at The Strategic Funds, for an in-depth analysis on the crypto markets as cryptocurrencies suffer yet another sell-off. Since November, about $1.3 trillion has been wiped out in the total market cap. Plus, what could we expect from the Biden administration's digital asset strategy that's reportedly set to release next month? Nyca Partners Executive-in-Residence Matt Homer and CoinDesk Managing Editor for Global Policy & Regulation Nikhilesh De provide their insights. Plus, Executive Editor Marc Hochstein explains Privacy Week at CoinDesk.

Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.