The Bitcoin (BTC) price action has kept traders and investors on the edge of their seats as macro factors keep pulling prices down.
The Federal Reserve continued its aggressive monetary policymaking, which, coupled with additional crypto market events, affected Bitcoin price action. As for the price of Bitcoin and other risky assets, however, they did what they usually do following FOMC meetings — swing erratically.
Bitcoin pumps then dump
On Nov. 2, after the FOMC meeting, the Fed’s announcement led to a momentary price pump for stocks and cryptocurrencies. In November, the Federal Reserve hiked interest rates by 75 basis points consecutively for the fourth time this year to combat inflation.
With inflation currently at a 40-year high in the U.S., each rate hike has caused the Bitcoin price to react almost nonsensically. Bitcoin isn’t the only currency or asset that reacts to Fed hikes, in fact, analysts have pointed out interesting deviations in SPY and SPX.
SPY is an ETF that is backed by shares of stock in the companies that are listed on the S&P 500, while the SPX is a theoretical index driven by the price of the S&P 500 itself. Analyst Gurgavin pointed out that each month the stock market dumped at 2:00 PM EST when the rate hike came out and rallied at 2:30 PM EST when Jerome Powell spoke.
July and September saw similar price action, while other months also had more or less the same effect.
Source: Gurgavin Twitter
For Bitcoin, the price pumped and remained positive for over 12 hours after the numbers were released on Nov. 10. The BTC price noted an almost 14% spike but soon began dumping after facing rejection at the $18,120 mark.
BTC 1-hour chart | Source: TradingView
It then plunged to a new 2-year low of $15,554 on Nov. 9 after the FTX exchange bankruptcy blowup. However, after the CPI report came out, the top crypto gained some ground.
Data from Jarvis Labs shows that BTC price returns in the 7-days prior and after FOMC meetings aren’t exactly predictable. Even though the larger market momentarily moved in the predicted/expected direction, it’s not a sure-shot way to base one’s trading on.
BTC price action before and after FOMC | Source: Jarvis Labs
So, should investors and traders expect similar ROIs and price action ahead of the next meet as well?
Bitcoin self-custody continues
Even though the macroeconomic conditions significantly affect BTC and its price action, the on-chain outlook has often been key to pinpointing BTC’s trajectory.
With the FTX drama still playing out, there are a few other metrics that better indicate what’s happening with Bitcoin and where the price might go.
Data from Glassnode shows that following the collapse of FTX, Bitcoin investors have been withdrawing coins to self-custody at a historical rate of 106,000 BTC/month. Similar exchange outflow spikes only took place three other times in BTC’s history: in April 2020, November 2020, and June-July 2022.
BTC Exchange balance and net position | Source: Glassnode
The failure of FTX has resulted in positive balance changes across all wallet groups. From shrimps to whales, there has been a very distinct change in Bitcoin holder behavior.
BTC trend accumulation score by cohort | Source: Glassnode
A look at BTC’s balances by group shows that the balance change has been dramatic since Nov. 6. The following groups added BTC:
- Shrimp [< 1 $BTC] increased holding by 33,700 BTC
- Crabs [1-10 $BTC] increased holding by 48,700 BTC
- Sharks [10-1k $BTC] increased holding by 78,000 BTC
- Whales [>1k $BTC] increased holding by 3,600 BTC
On the whole, the macroeconomic conditions alongside FTX failure have led to a transition phase for investor holdings.
As expected by analysts, the December FOMC meeting could be another turning point in the BTC price action. Ahead of that, however, the market still remains largely shaky as on-chain metrics show a larger deviation in investor holdings.
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