01/23 update below. This post was originally published on January 22
The bitcoin price has rocketed 30% since the turn of the year, climbing over $23,000 per bitcoin after falling under $16,000 in late 2022. The ethereum price has seen a similar rally while some top ten cryptocurrencies—BNB, XRP
01/23 update: Bitcoin and other major cryptocurrencies have continued to climb over the weekend, pushing the combined crypto market to levels not seen since the shock collapse of major crypto exchange FTX in November.
The bitcoin price rally has opened up a so-called futures gap that some think could be a “magnet” for the price. Such gaps are the difference between a market session’s close and its subsequent open. When a gap is said to have been “filled” it means the price has returned to its pre-gap level.
“Bitcoin continued its surge over the weekend, rising to a peak of around $23,400. This has left a CME gap on the Bitcoin CME Futures chart at around $22,400, which many analysts theorize is a magnet for price,” Marcus Sotiriou, market analyst at the digital asset broker GlobalBlock, said in emailed comments. “There are also CME gaps at around $17,000 and $20,000, which were formed on this recent aggressive move”—something that could suggest the bitcoin price will drops back to these levels in the short term.
Meanwhile, technical analysis suggests “bitcoin has started a new bull market and is headed for $24,000, where the psychologically important 200-week moving average and the 161.8% Fibonacci level of the momentum from the December lows are concentrated,” according to Alex Kuptsikevich, senior market analyst at FxPro, said in an emailed note. “The 50-week moving average is headed to the same area. The market may need a long recharge and consolidation before a new upside wave begins.”
Now, former chief executive of bitcoin and crypto exchange BitMex Arthur Hayes has warned a “disastrous global financial meltdown” could be about to crash the bitcoin price and crypto market.
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“Bitcoin is simply experiencing a natural bounce off the local lows of sub $16,000,” Hayes wrote in a blog post, adding he believes “bitcoin is rallying because the market is frontrunning a resumption” of Federal Reserve money printing.
“Market anticipation of a rate hike pause and even a Fed pivot have been building, in spite of repeated Fed official comments to the contrary,” crypto market analyst Noelle Acheson wrote in an emailed note.
Fed chair Jerome Powell, who last year pushed interest rates to a 15-year high as part of a concerted effort to drive down inflation, has said rates will need to go higher in 2023, echoed by other Fed officials who have endorsed raising the benchmark federal funds rate above 5%.
“If the Fed does not follow through with a pivot, or multiple Fed governors talk down any expectation of a pivot even after ‘good’ consumer price index (CPI) prints, bitcoin will likely crash back down towards previous lows,” Hayes wrote, predicting this scenario would cause “risky asset prices crater. Bonds, equities, and every crypto under the sun all get smoked as the glue that holds together the global USD-based financial system dissolves.”
If that “disastrous global financial meltdown” scenario occurs, then Hayes expects he’ll “get another bite at the apple” and “will know that the market has probably bottomed, because the crash that happens when the system temporarily breaks will either hold the previous $15,800 lows or it won’t.”
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The bitcoin price dropped to under $16,000 following the shock FTX collapse last year that piled pressure on the combined crypto market, which had already lost around $2 trillion.
However, despite warning of a looming market meltdown, Hayes expects the Fed to eventually step in to backstop markets.
“It doesn’t really matter what level is ultimately reached on the down draft because I know the Fed will subsequently move to print money and avert another financial collapse, which will in turn mark the local bottom of all risky assets,” Hayes added.