Will the Fed end the dip in cryptos prices or will we see Bitcoin at $40,000 and Ethereum at $3,000?
By Noemi Jansana / Alejandra Zamora
Date: Wednesday 15 Dec 2021
(Sharecast News) - The technical appearance of Bitcoin and Ethereum deteriorated significantly during the month of December, to the point that even the most bullish in the long term do not dare to point out what may happen in the short term. However, the cryptoassets market maintain the narrative that the falls of the last few sessions are entirely due to the US Federal Reserve (Fed), so what the central bank declares will be key and will set the course until the end of the year.
The divergences among analysts on how cryptoassets will react are notable. Some think that on Wednesday there will be an end to the falls, as there will be a "buy on the news" movement, with whatever the US central bank states in its monetary policy decision. Others, on the other hand, believe that the Fed's confirmation that it will accelerate 'tapering' and move rate hikes closer to next year will prolong the sharp correction in cryptoassets.
Bitcoin, 33% below all-time highs, has had a tough time since the start of this week, when it plunged towards $45,670. Since then, it´s been somewhat flat, trying to find support around $47,000, where "it found a good waterline over the last couple of weeks, barring the sudden drop 10 days ago, so this could be a key level for the cryptocurrency as it looks to find its groove again," commented Craig Erlam, analyst at Oanda. Bitcoin regained $48,000 on Tuesday, where it remains on Wednesday.
"A loose Fed could excite the cryptomarket, but it may be a lot to ask given the levels of inflation we are seeing," added the expert.
Technical indicators play in favor of the pessimists, as a head and shoulders pattern formation is sensed on the charts. "The current declines and the following consolidation could complete the right shoulder, with a neckline at $41,500 and further buying interest right at the $40,000 level," they pointed out at 'CoinTelegraph'.
Data managed by Whalemap, which defines itself as a blockchain transaction analysis account, also points to the $40,000 level as an area to keep a close eye on.
"The problem in the short term is that anything can happen," indicated José María Rodríguez, a technical analyst at 'Bolsamanía'. And he further explained that "we have the king of cryptocurrencies in no man's land, halfway between the important support of $40,000-$41,500 (the September lows) and far from the resistance of $53,600, let alone $60,000". "In very short-term figures, this has support just around the corner at last week's lows ($47,215) and resistance at last week's highs ($52,195)," he concluded.
However, other market observers point out that, once the Fed's verdict is known, traders will get carried away with buying in a "sell the rumor, buy the news" move. At least in the short term, with a target towards $53,000 and clear resistance at $60,000.
Despite all this, it´s difficult to bet that these rises, if they occur, will be more than a rebound after the falls, because if the US central bank confirms what is expected, a rate hike and a faster-than-expected end to easy money policies could turn the market bearish.
ETHEREUM, HEADING FOR $3,000?
As for the rest of the sector, there was a purge in the major 'altcoins' that affected Ethereum. The number two cryptocurrency hit an all-time high around $4,867 in early November, only to fall nearly 20% a month later on rising profit-taking sentiment.
But it could get worse as "it´s clearly lost the $4,000 level and declines are projected towards the next support, which is located around $3,500," as indicated by the experts at IG Markets.
The period of loose monetary policies after March 2020 was instrumental in boosting the Ether price by more than 3,330%. Therefore, the increasing likelihood of an acceleration in stimulus tapering may put the current rally and the bull market as a whole in the deep freeze, according to some analysts.
The price of $3,900, which has acted as support for a long time now, stands as the first resistance to overcome for the rallies to return. If the sell-off continues, however, the Ethereum network's native unit could fall to $3,250. Other experts are even more pessimistic and point to $2,800.
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