Značka: federal reserve

Boom or bust? Is there a way for Bitcoin price to hit $100K in 2022?

The internet is filled with Bitcoin (BTC) price forecasts. For example, some analysts believe that the flagship crypto will hit $1 million per coin in the next 10 years, while others think BTC price will eventually drop to zero.Without dwelling on predictions that are five or more years ahead of us, let us focus on what Bitcoin could do, say, in the next six months? Again, the forecasts vary drastically. For instance, Antoni Trenchev, the founder of Nexo Finance, sees Bitcoin price hitting $100,000 by mid-2022.On the other end of the spectrum is Sussex University professor Carol Alexander, who thinks Bitcoin price could drop to as low as $10,000, thereby wiping out all the gains it had made in 2021.Bitcoin has been trending almost in the middle of these two extremely far predictions and at press time the cost to purchase one BTC is close to $36,500 at Coinbase.BTC/USD weekly price chart. Source: TradingViewBitcoin’s circulation will increase on an average of 6.25 BTC per 10 minutes until the next halving in early 2024. This means miners will produce about 900 BTC every day. As a result, by the end of June 2022, there will be a total of 162,900 BTC created into the year.This would push the total Bitcoin supply in circulation to about 19.078 million BTC. If BTC price is $100,000 by then, its total market capitalization would be nearly $2 trillion, up 128.50% from the year’s opening valuation near $875 billion.Conversely, a drop to $10,000 would push the Bitcoin market capitalization of the total circulated tokens down to over $190 billion, down $685 billion, or about 78%, from this year’s open.So the biggest question that comes to mind after looking at these mind-boggling predictions is whether it is even possible for Bitcoin to move violently towards either of the targets mentioned above. In my opinion, the answer is a BIG YES, mainly because BTC price has been notoriously volatile in the past.Bitcoin quarterly returns. Source: CoinglassOne question to consider is whether or not investors are ready to inject almost a trillion dollars into the Bitcoin market across the next six months? Trenchev believes they may because of the “cheap money” factor.Sovereign currency devaluation remains a catalystInvestors will have noticed that the U.S. dollar’s valuation has been recovering lately. A popular economic indicator, dubbed as the “U.S. dollar index,” measures the greenback’s strength against a weighted basket of six foreign currencies — the Euro (EUR), Japanese Yen (JPY), Pound Sterling (GBP), Canadian Dollar (CAD), Swedish Krona (SEK), and Swiss Franc (CHF) — surged over 7% to 96.22 last year.U.S. dollar index weekly price chart. Source: TradingViewIt’s also worth noticing that the dollar’s valuation has surged only against fiat currencies, but against commodities, the greenback has been losing battle after battle. For instance, a recent U.S. Bureau of Labor Statistics report indicates that consumers paid 7% higher for everyday items in December 2021 than they did 12 months ago. In other words, the inflation in the world’s largest economy has risen to the levels never seen before 1982.This shows the dollar is nothing but the best weak boxer in a ring competing with the six weakest boxers. Sure, the greenback has been winning rounds against them all, but it has also been running away from the real competition. Speaking of competition, let’s compare its value against a scarcer asset, gold.Fiat currencies versus Gold since 1900. Source: VOIMAThe image above also shows that almost all the fiat currencies have lost their sheen against gold. The big elephant in the room is inflation, which benefiting investors that have been hoarding the precious metal — or any hard money equivalent — against the current bearish trend in currencies like the dollar.Currently, there is about $40 trillion circulating across markets, which includes all the physical money and the money deposited in savings and checking accounts. Meanwhile, investments, derivatives and cryptocurrencies are above $1.3 quadrillion.So yes, there are enough greenbacks available in the market to pump the Bitcoin market by another trillion dollars, such that its cost per unit rises to $100,000 in the next six months.Why hasn’t BTC hit $100,000 already?Before even entertaining that argument, it is wiser to look at Bitcoin’s market cap performance over the years.BTC/USD six-month market cap chart featuring $100B+ in rallies. Source: TradingViewIn the six-month timeframe chart above, one can see that there has not been a single instance wherein the Bitcoin market capitalization had risen by over $1 trillion. Similarly, there also has not been a single case where Bitcoin’s market valuation dropped by more than $190 billion in six months, as required in the event of a BTC price drop to $10,000.Despite not rising or falling drastically, the Bitcoin market — as per historical data — attracts more capital in that it spits out, indicating why its price per unit has rallied by more than 14,250% to date since January 2014.Now, returning to the “why-it-has-not-happened” argument, there seems to be only one answer: uncertainty. And uncertainty has many branches, ranging from regulatory troubles to fears that the Bitcoin market may need a correction after rallying for almost two years in a row.The Fed’s “taper tantrum” is impacting investor confidenceThe most commonly discussed reason for Bitcoin’s recent drop from $69,000 to $34,000 is the U.S. Federal Reserve’s decision to end its $120 billion a month asset purchasing program sooner than anticipated. This is expected to be followed by at least three interest rates hikes from their current near-zero levels.These loose monetary policies ended up injecting about $6.5 trillion since the coronavirus-induced global market crash in March 2020. As a result of the excess liquidity, the dollar’s value dropped while riskier assets, including Bitcoin, became ballistically bullish. According to Crossborder Captial founder Micheal Howell, the excess funds in the market ‘had to go somewhere.’M2 money supply weekly chart. Source: TradingViewAs the Fed unwinds its quantitative easing policy to tame inflation, it effectively removes the excess dollars from the market. And as the markets — hypothetically — run out of cash, they raise it by selling their most profitable investments, be it stock, real estate, Rolex watches or crypto.Therefore, the next six months could turn out to be a seesaw between those who need cash and those who don’t. Inflation led by the dollar devaluation could keep many investors from selling their assets, including Bitcoin. But with the Fed switching off its liquidity plug, crypto markets could face difficulties in attracting new money.This leaves Bitcoin with investors and firms that have excess cash in their treasuries and have been looking to deploy them into easily liquefiable assets. So far, Bitcoin has attracted big names like Tesla, Square, MicroStrategy, and others. So naturally, it would take at least a popular Wall Street firm’s willingness to add Bitcoin to its treasury to enable BTC’s push toward $100,000.Waiting on the retail boomMeanwhile, as inflation creeps into people’s everyday lives, their likelihood of adopting hard assets to protect their savings could also mean a boon for the Bitcoin market. For instance, BTC’s climb to $69,000 last year coincided with an unprecedented spike in retail interest, per a Grayscale Investment report.Related: Retail is pushing the Bitcoin price up, says Ledger CEOThe U.S. firm surveyed 1,000 investors and found that 59% were interested in investing in Bitcoin. Meanwhile, 55% said they had purchased the assets between December 2020 and December 2021.Bitcoin addresses with a non-zero BTC balance. Source: GlassnodeWhether boom or bust, here’s what needs to happenIf, Bitcoin were to reach $100,000 by the end of June 2022, here’s what would need to happen. The M2 money supply remains at an all-time high.The planned interest rate hikes fail to keep inflation below the Fed’s 2% target.The number of non-zero Bitcoin wallets continues to rise to new record highs.More companies add BTC to their treasuries.Meanwhile, Bitcoin could crash to $10,000 if:Long-term investors decide to dump Bitcoin to raise cash.Regulatory issues and a sharp correction in equities prices weighs on crypto pricing.Some unforeseen market manipulation or black swan event tanks BTC price like the March 2020 flash crash.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Fed issues discussion paper on benefits and risks of a digital dollar

The U.S. Federal Reserve is opening comments to the public after releasing a discussion paper on the pros and cons of a potential central bank digital currency.In a publication released Thursday titled “​​Money and Payments: The U.S. Dollar in the Age of Digital Transformation”, the Fed said it would likely not be authorized to issue digital wallets or accounts capable of holding a U.S. central bank digital currency, or CBDC, but rather leave such matters to the private sector. In addition, the government body said it would be considering privacy concerns, whether a CBDC could be “readily transferable between customers of different intermediaries,” and identity verification to combat money laundering and the financing of terrorism.The paper added that the U.S. rolling out a CBDC could mitigate the risks of “proliferation of private digital money” while still encouraging innovation in the private sector, leveling the playing field between large and small firms for whom some of the costs of issuing their own digital currency may be prohibitive. Cross border payments, the speed and efficiency of digital payments, and additional financial inclusion are all among the potential benefits of a digital dollar. “A CBDC could fundamentally change the structure of the U.S. financial system, altering the roles and responsibilities of the private sector and the central bank,” said the Fed paper. “Some have suggested that, if these new CBDCs were more attractive than existing forms of the U.S. dollar, global use of the dollar could decrease — and a U.S. CBDC might help preserve the international role of the dollar.”Regarding the risks in introducing a digital dollar to the U.S. and world economies, the Fed said that a CBDC could effectively replace commercial bank money, raising prices for retail customers and driving interest away from investments in “mutual funds, Treasury bills, and other short-term instruments.” The paper also repeated some of the concerns previously raised by officials on the stability of the current financial system, such as how the Fed might need to increase its reserves based on demand for a digital currency, and striking t balance between user privacy and transparency needed to prevent fraud.To that end, the Fed is opening up comments to the public for 120 days — until May 20 — asking concerned citizens to address 22 questions related to the possible rollout of a digital dollar’s benefits, risks, design and policy considerations: “The Federal Reserve will only take further steps toward developing a CBDC if research points to benefits for households, businesses, and the economy overall that exceed the downside risks, and indicates that CBDC is superior to alternative methods. Furthermore, the Federal Reserve would only pursue a CBDC in the context of broad public and cross-governmental support.”First announced by Fed chair Jerome Powell in May 2021 to be released last summer, the publication of the CBDC discussion paper has been delayed several times. On Jan. 11 during his testimony to members of the Senate Banking Committee, Powell said that the paper would be coming in a matter of weeks following delays due to “changes in monetary policy.”Related: Digital dollar needs broad consensus among authorities, says US Treasury SecretaryThough a notice from the Fed stated the discussion paper “does not favor any policy outcome,” Powell has previously suggested there was no rush in the U.S. releasing a digital dollar despite other countries, including China, moving ahead with trials in different cities. Athletes are expected to travel to China for the 2022 Winter Olympics in a few weeks when competitors and visitors will have the opportunity to use the country’s digital yuan.

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Law Decoded: First-mover advantage in a CBDC conversation, Jan. 10–17

Last week saw an unlikely first move in the opening narrative battle around a prospective U.S. central bank digital currency: Congressperson Tom Emmer came forward with an initiative to legally restrict the Federal Reserve’s capacity to issue a retail CBDC and take on the role of a retail bank. This could be massively consequential as we are yet to see a similarly sharp-cut expression of an opposing stance. As a matter of fact, it is not even clear whether other U.S. lawmakers have strong opinions on the matter other than, perhaps, condemning privately issued stablecoins as a digital alternative to the dollar. By framing a potential Fed CBDC as a privacy threat first, Emmer could tilt the conversation in the direction that is friendly to less centralized designs of digital money.Below is the concise version of the latest “Law Decoded” newsletter. For the full breakdown of policy developments over the last week, register for the full newsletter below.U.S. representative vs. U.S. CBDCThe tension between decentralized digital money and state-issued CBDCs is at the heart of the ongoing global shift toward digital payment rails. Last week marked the first-ever instance of a sitting U.S. member of Congress taking a formal stance against the Federal Reserve’s potential retail CBDC move.Sovereign digital fiat will undoubtedly be more convenient than its analog predecessor, yet the privacy costs of such convenience might be enormous. If all money is CBDC, the government’s financial surveillance capacity will become virtually unlimited, denying people the anonymity that cash transactions once afforded. Representative Emmer cited these privacy concerns as a rationale for introducing the bill that would ban the Fed from issuing a CBDC directly to consumers and acting as a retail bank.While it may take a long time before Emmer’s initiative reaches the House floor, the mere articulation of such a position by a member of Congress can have a significant impact on the course of the policy conversation around a potential CBDC. This is especially true in the light of some top Fed officials’ stated willingness to defer to Congress on the issue.Another ban scare, another El SalvadorElsewhere in the world, the signals that various regulators have been sending over the past week ran the gamut from potentially banning crypto transactions in Pakistan to considering the replication of El Salvador’s Bitcoin-as-legal-tender move in Tonga. Pakistan’s drive toward a blanket ban follows a familiar scenario where it is the nation’s central bank that is actively committed to outlawing crypto transactions and penalizing crypto exchanges. The task of determining the legal status of cryptocurrencies fell to the High Court of the province of Sindh, yet the judges refrained from making the final call and passed the issue on to the specialized government ministries. On the opposite side of the regulatory spectrum, the island nation of Tonga could be embarking on the Bitcoin adoption trail soon. An announcement by Lord Fusitu’a, a former member of the Tongan parliament and chairman of several regional interparliamentary groups, suggested that the country could make Bitcoin legal tender as soon as late 2022. Given Tongans’ heavy reliance on remittances, replicating El Salvador’s move almost identically seems logical.IMF sees the demise of crypto’s hedge roleAmong many risk factors that analysts ascribed to digital assets over the years, the financial stability risk that stems from crypto’s growing correlation with equity markets comes across as a novel talking point. Yet this is what a group of the International Monetary Fund researchers concluded upon examining the dynamics of Bitcoin to S&P 500 index correlation. The authors argued that the growing interconnectedness between the two asset classes defeats crypto’s hedge function, as it no longer serves to diversify investors’ risks. The IMF analysts’ conclusions come down to a reasonable notion that there should be a global, coordinated approach to crypto regulation.

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President Biden taps economists for Fed governors’ seats, Sarah Bloom Raskin as vice chair for supervision

The White House has officially tapped former Fed governor Sarah Bloom Raskin to serve as the vice chair for supervision for the Federal Reserve, as well as economists Lisa Cook and Philip Jefferson to fill two empty seats on its board of governors.In a Friday announcement, U.S. President Joe Biden said he had nominated Cook, an Obama-era economic adviser and Michigan State University faculty member, as well as Jefferson, a former research economist for the Fed, to the board of governors in addition to Raskin. Jefferson and Cook will take two of the vacant seats in the group of seven governors, with Jerome Powell and Lael Brainard nominated to serve as chair and vice-chair, respectively.According to the president, the three nominees have the “experience, judgment and integrity to lead the Federal Reserve and to help build our economy back better for working families.” He cited Jefferson’s and Cook’s decades of experience working on economic issues while saying Raskin was “among the most qualified nominees ever” for vice-chair for supervision. The vice-chair for supervision, as opposed to the vice-chair of the Federal Reserve’s board of governors, is a relatively new role within the government agency. Randal Quarles was the first to hold the position for the full four-term year from 2017 to 2021, shortly before resigning as a Fed board member in December. According to the Dodd–Frank Wall Street Reform and Consumer Protection Act, passed in 2010, the vice-chair for supervision “shall develop policy recommendations for the Board regarding supervision and regulation of depository institution holding companies and other financial firms supervised by the Board and shall oversee the supervision and regulation of such firms.”Many vacancies at the Federal Reserve, the result of terms expiring and board members resigning, have given President Biden the opportunity to shake up the agency’s leadership. This week, his picks for the Fed chair and vice-chair — Jerome Powell and Lael Brainard, respectively — testified before the Senate Banking Committee in advance of a vote before the full Senate. Should they receive more than 50 votes, Powell, Brainard and Raskin would serve as the Fed board’s leadership until 2026, with Cook and Jefferson serving 14-year terms.Related: US lawmaker hints at upcoming crypto legislation as Jerome Powell says Fed will release report on digital currency soonA significant change in leadership of some of the top financial regulators in the United States could have an impact on how the government looks at both crypto and blockchain. Both the Securities and Exchange Commission and the Commodity Futures Trading Commission will likely see a shakeup in 2022, with the expected departure of SEC commissioners Elad Roisman this month and Allison Lee in June. In addition, President Biden has not suggested he intends to re-nominate CFTC commissioner Dawn Stump prior to her term expiring in April.

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Fed's Lael Brainard invites Congress to choose whether to compete with China's digital yuan

At her confirmation hearing in front of members of the Senate Banking Committee, Federal Reserve board of governors member Lael Brainard said Congress would ultimately have to decide to move forward with a central bank digital currency, or CBDC.Addressing pro-crypto Senator Cynthia Lummis at the Dirksen Senate Office Building on Thursday, Brainard said the Fed would welcome Congress “taking a very important role” in updating the regulatory framework for cryptocurrencies and digital assets. When questioned as to the possible use of CBDCs to surveil users’ financial activities — as Lummis alleged happens in China — Brainard again deferred the decision to lawmakers.”This question about digital currency — it’s a big question — we really are looking to Congress [in deciding to make CBDCs available to retail customers] and the administration to give us guidance in this area,” said Brainard. “We want to make sure that we do the requisite research on policy and technology so we’re in a position to move forward if Congress decides it’s important to be able to compete with China in this regard. Of course, privacy protections are very important in any kind of approach that might be taken.”Lael Brainard addressing Senator Cynthia Lummis on ThursdayNominated by President Joe Biden to become the next vice chair at the Federal Reserve, Brainard is replacing Richard Clarida, who announced on Monday he intended to resign on Friday ahead of his term expiring at the end of the month. Should she receive more than 50 votes once her nomination goes to the full Senate, she would serve as the Fed vice chair until 2026.Brainard’s and Fed chair Jerome Powell’s testimony before senators came the same week Minnesota Representative Tom Emmer introduced a bill aimed at prohibiting the Fed from issuing a CBDC directly to U.S. consumers. According to Emmer, having the agency require users to open accounts to access the benefits of a digital dollar would “put the Fed on an insidious path akin to China’s digital authoritarianism.”Related: Hong Kongers use blockchain to save evidence of anti-authoritarian strugglesDuring her time at the Fed, Brainard has spoken in favor of the U.S. issuing a digital dollar given China’s lead in rolling out its own CBDC. In July, she called for urgency in establishing a CBDC, saying she could not “wrap [her] head around” the U.S. not having one, given the dominance of the fiat dollar in international payments. She has also expressed concerns about “legal and regulatory safeguards, financial stability, and the role of currency in society” for cryptocurrencies like Bitcoin (BTC). At least three seats at the Federal Reserve’s board of governors will be open to nominations from President Biden in 2022 following the departure of Clarida on Friday. The U.S. President is reportedly considering Duke University law professor Sarah Bloom Raskin to join the group of seven governors, in addition to economists Lisa Cook and Philip Jefferson.

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US lawmaker proposes bill aimed at limiting Fed's ability to issue CBDC

Minnesota Representative Tom Emmer has announced he will be introducing a bill intended to prevent the Federal Reserve from acting as a retail bank in the potential issuance of a digital dollar.In a Wednesday announcement, Emmer said the bill would prohibit the Fed from issuing a central bank digital currency, or CBDC, directly to U.S. consumers. According to the Minnesota representative, having the government entity require users to open accounts to access the benefits of a digital dollar would “put the Fed on an insidious path akin to China’s digital authoritarianism.”“The Fed does not, and should not, have the authority to offer retail bank accounts,” said Emmer. “Regardless, any CBDC implemented by the Fed must be open, permissionless and private. This means that any digital dollar must be accessible to all, transact on a blockchain that is transparent to all, and maintain the privacy elements of cash.” Today, I introduced a bill prohibiting the Fed from issuing a central bank digital currency directly to individuals. Here’s why it matters: pic.twitter.com/S7pQ5rVc6n— Tom Emmer (@RepTomEmmer) January 12, 2022In addition to claims of potential financial surveillance, the U.S. lawmaker criticized a CBDC rollout from the Fed as being too centralized, leaving users’ personal information vulnerable to attack. According to Emmer, a digital dollar should be aimed at protecting financial privacy, maintaining the dominance of the country’s fiat currency, and encourage innovation.The introduction of the bill came just one day after Jerome Powell said the Fed would be releasing its report on CBDCs in the coming weeks after several delays. In a confirmation hearing before the Senate Banking Committee, the Fed chair also answered in the affirmative when Senator Pat Toomey questioned the Federal Reserve’s ability to act as a retail bank. “Some have advocated, as you know, that a central bank digital dollar be used and developed in such a fashion that individual Americans have retail accounts with the Fed, and the Fed becomes the retail banker for America,” said Toomey. “It seems to me that there is absolutely nothing in the history, the experience, the expertise, the capabilities of the Fed, that lend the Fed to being a retail bank.”Related: US lawmakers introduce bill to ‘fix’ crypto reporting requirement from infrastructure lawEmmer has previously advocated for greater regulatory clarity of digital assets in the U.S. through legislation, introducing bills in May and July 2021. He and other lawmakers have also questioned the Securities and Exchange Commission’s decision not to approve a Bitcoin (BTC) exchange-traded fund, appealing directly to SEC chair Gary Gensler.

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Bitcoin shoots to $44,000 as US inflation hits 7.8% in December

The latest figures from the United States Bureau of labor statistics show that the (Consumer Price Index) CPI hit 7% in December. Bitcoin (BTC) was volatile prior to the announcement, fluctuating over $2,000 from lows of $41,000 to $43,000 on Wednesday morning. Upon release of the figures, the price continued its upward climb, touching $44,000. Prior to the announcement, Twitter was rife with speculation. According to a poll by @coinbureau, 53% of his 580,000 followers expected CPI to overshoot the consensus estimation of 7% inflation.Macroeconomic specialist and cryptocurrency soothsayer Lyn Alden was on the money.December CPI comes out tomorrow and has a decent shot at reaching 7%+ year-over-year.But then unless monthly inflation accelerates from here, the year-over-year figure will likely peak within Q1 2022. pic.twitter.com/7hjA3ehAXI— Lyn Alden (@LynAldenContact) January 11, 2022The graph for inflation from the FED over the past 10 years is eye-opening. Since the pandemic, marked in grey, the inflation level plummeted before beginning a dizzying climb to 7%.Related: Bitcoin crash ahead? Expert warns higher inflation could whip BTC price to $30KCastle Island Ventures’ Nic Carter was more tongue-in-cheek prior to the data update. In anticipation of more inflation rises, he joked that he was “looking forward to the inflationista cope if CPI prints double digits”. Inflation rates have become of paramount concern to developed countries around the world, but particularly for the United States. 7% is the highest inflation rate since the 1980s. Traditional markets including the S&P kicked off in the green, up 0.36%, while BTC was up 2.8% during the morning’s action.

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US lawmaker hints at upcoming crypto legislation as Jerome Powell says Fed will release report on digital currency soon

At his confirmation hearing in front of members of the Senate Banking Committee, Federal Reserve chair Jerome Powell said the agency would be releasing its report on cryptocurrencies “within weeks.”Addressing Idaho Senator Mike Crapo remotely from the Dirksen Senate Office Building on Tuesday, Powell said the Fed’s report on digital currencies wasn’t “quite where we needed to get it” but would be released soon regardless. The Fed chair cited “changes in monetary policy” as part of the reason for the delayed report, which is expected to address policy surrounding the possible rollout of a central bank digital currency in the United States.“It’s more going to be an exercise in asking questions and seeking input from the public rather than taking a lot of positions on various issues, although we do take some positions,” said Powell. “The report really is ready to go and I would expect we will drop it — I hate to say it again — in coming weeks.”Powell’s testimony comes the same day Minnesota Representative Tom Emmer hinted on Twitter that he would be unveiling new legislation related to digital currency, without providing specifics. It’s unclear if the upcoming bill would be aimed at “fixing” the definition of a broker in the infrastructure law, which took effect November 2021, or another regulatory path to encourage innovation in the crypto industry. New digital currency legislation coming soon— Tom Emmer (@RepTomEmmer) January 11, 2022During his time as Fed chair, Powell has suggested there was no rush in the U.S. releasing a digital dollar despite other countries, including China, moving ahead with CBDCs. In December, he spoke in favor of stablecoins, saying they could be a “useful, efficient consumer-serving part of the financial system if they’re properly regulated.”Should he receive more than 50 votes once his nomination goes to the full Senate, Powell would be re-confirmed as the Fed chair for another four years. Lael Brainard will also be addressing U.S. lawmakers in a Thursday hearing regarding her confirmation as the Fed vice chair, replacing Richard Clarida.Related: US is not moving fast enough to develop a CBDC, says former CFTC chairAt least three seats at the Federal Reserve’s board of governors will be open to nominations from U.S. President Joe Biden in 2022 following the departure of Clarida, who yesterday announced he intended to resign on Jan. 14 ahead of his term expiring. Biden is reportedly considering Duke University law professor Sarah Bloom Raskin to join the group of seven governors, in addition to economists Lisa Cook and Philip Jefferson.Cointelegraph reached out to Tom Emmer’s office, but did not receive a response at the time of publication.

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Bitcoin dip below $40K follows Fed signal of a possible fourth rate hike in 2022

Global financial markets, stocks and cryptocurrencies took a knock on Jan. 10 after rumors that the Federal Reserve may hike interest rates four times in 2022 circulated and sparked a sell-off and sent the benchmark 10-year Treasury yield briefly above 1.8%.Data from Cointelegraph Markets Pro and TradingView shows that a massive wave of selling broke Bitcoin’s (BTC) support near $42,000, resulting in a plunge to $39,660 before buyers stepped in to buy the perceived dip.BTC/USDT 1-day chart. Source: TradingViewHere’s what analysts are saying about this latest drawdown in BTC and what could possibly come next as analysts watch to see what the impact of the Fed’s easy money policies ending means for risk on assets. A shrinking money supply is bad for BitcoinThe Fed’s shifting monetary policy is generating significant challenges for risk-on assets but this was anticipated by analysts at Delphi Digital who noted that the headwinds facing BTC and the crypto market have more to do with “tighter liquidity conditions and heightened market volatility” than with rate hikes. According to Delphi Digital, “the macro tailwinds that helped propel BTC and crypto assets to new highs over the last 12-18 months have reversed course” as highlighted in the following chart showing that the global M2 supply topped out near March of 2021 and has been on the decline since then. Bitcoin price vs. Global M2 Supply. Source: Delphi DigitalThe peak in M2 supply came around the same time that Bitcoin set a new all-time high in early 2021 and was followed by a drawdown below $30,000 over the next couple of months. Despite the late 2021 resurgence in BTC which once again established a new high at $68,789 in November, the continued drop in M2 supply has taken its toll on the market which has been exasperated by the Fed sharing its plan to accelerate its timeline for raising interest rates. Delphi Digital said, “The shift away from excess liquidity and accommodative monetary conditions is a structural headwind we’ve highlighted in recent months, which now appears to be coming to a head.” The talk of higher interest rates has also breathed new life into the U.S. dollar, which Delphi Digital noted “does little favor to assets like BTC, which tends to move inversely with USD.”BTC/USD vs. DXY Index (Inverted). Source: Delphi DigitalDelphi Digital said, “We continue to stress how important the U.S. dollar is in determining the direction of global markets, especially assets tethered to the currency debasement narrative.”Related: Bitcoin drops below $40K for first time in 3 months as fear set to ‘accelerate’“A good buying opportunity”Analysis on the current chart structure for BTC was offered by analyst and pseudonymous Twitter user ‘Resolute’ who posted the following chart highlighting the 42.5% decrease in BTC price from its highs in November. BTC/USDT 2-day chart. Source: TradingViewResolute said, “Conceivably a double bottom from the September 2020 low, after retracing Q4s move up. Currently trading below the 2d 200 EMA which has historically been a good buying opportunity.”Resolute’s observation that this may be a good area of accumulation was echoed by cryptocurrency trader and Cointelegraph contributor Michaël van de Poppe, who posted the following tweet indicating a preference for opening a long as opposed to shorting the current market. I’d rather long than short here for #Bitcoin. pic.twitter.com/QUc8n58b8K— Michaël van de Poppe (@CryptoMichNL) January 10, 2022The overall cryptocurrency market cap now stands at $1.192 trillion and Bitcoin’s dominance rate is 40.9%.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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'Most bullish macro backdrop in 75 years' — 5 things to watch in Bitcoin this week

Bitcoin (BTC) starts a new week in a strange place — one which is eerily similar to where it was this time last year.After what various sources have described as an entire twelve months of “consolidation,” BTC/USD is around $42,000 — almost exactly where it was in week two of January 2021.The ups and downs in between have been significant, but essentially, Bitcoin remains in the midst of a now familiar range.The outlook varies depending on the perspective — some believe that new all-time highs are more than possible this year, while others are calling for many more consolidatory months.With crypto sentiment at some of its lowest levels in history, Cointelegraph takes a look at what could change the status quo on shorter timeframes in the coming days.Will $40,700 hold?Bitcoin saw a trying weekend as the latest in a series of abrupt downward moves saw $40,000 support inch closer.Data from Cointelegraph Markets Pro and TradingView showed BTC/USD hitting $40,700 on major exchanges before bouncing, a correction which has since held.Ironically, it was that very level which was in focus on the same day in 2021, that nonetheless coming during what turned out to be the more vertical phase of Bitcoin’s recent bull run.Last September also returned the focus to $40,700, which acted as a turning point after several weeks of correction and ultimately saw BTC/USD climb to $69,000 all-time highs.Now, however, the chances of a breakdown to the $30,000 zone are unreservedly higher among analysts.“Weekly Close is just around the corner,” Rekt Capital summarized alongside a chart with target levels. “Theoretically, there is a chance that $BTC could perform a Weekly Close above ~$43200 (black) to enjoy a green week next week. Weekly Close under ~$43200 however & BTC could revisit the red area below.”BTC/USD annotated candle chart. Source: Rekt Capital/ TwitterBitcoin ultimately closed at $42,000, since hovering at around that level in what could turn out to be some temporary relief for bulls.“I think market puts in a lower high,” fellow trader and analyst Pentoshi forecast, adding that he believes $40,700 will ultimately fall.An increasingly alluring target, meanwhile, lies at last summer’s $30,000 floor.Consensus forms over dire outlook for cashThe macro picture this week is particularly complicated for risk asset fans, with Bitcoin and altcoins no exception.What the future holds, however, varies considerably from one pundit to another.The United States Federal Reserve is broadly seen to start raising interest rates in the coming months, this making investors de-risk and causing a headache for crypto bulls. “Easy money,” which began flowing in March 2020, will now be much harder to come by.The bearish viewpoint was summarized neatly by ex-BitMEX CEO, Arthur Hayes, in his latest blog post last week.“Let’s forget what non-crypto investors believe; my read on the sentiment of crypto investors is that they naively believe network and user growth fundamentals of the entire complex will allow crypto assets to continue their upward trajectory unabated,” he wrote. “To me, this presents the setup for a severe washout, as the pernicious effects of rising interest rates on future cash flows will likely prompt speculators and investors at the margin to dump or severely reduce their crypto holdings.”This week sees the U.S. consumer price index (CPI) data for December released, numbers which will likely feed into the story of surprise inflation gains.Hayes is far from alone in worrying over what the Fed may bring to crypto this year, with Pentoshi among others likewise calling a temporary end to the bull run.“And the final question is, can crypto ignore the Fed if it decides to go all out wielding a deflationary machete? I doubt it,” analyst Alex Krueger concluded in a series of tweets on the issue this weekend. “‘Don’t fight the Fed’ applies both ways, up and down. If the Fed is *too hawkish* then Houston, we have a problem.”There were some optimists left in the room. Dan Tapiero, Founder and CEO of 10T Holdings, told followers to “ignore” the recent rout and focus on an unchanged long-term investment opportunity.“Most bullish macro backdrop in 75 years,” he said. “Booming economy supported by massive negative real rates. Fed will never equalize rates with inflation. Stay long stocks and Bitcoin and ETH. Hodl through short term volatility. Real Dollar cash savings will continue to lose value.”Here’s a look at the Effective Fed Funds Rate and Inflation Rates when the Unemployment Rate was at 3.9%, as it is today.Find the outlier… pic.twitter.com/zU1zRj1uXC— Charlie Bilello (@charliebilello) January 7, 2022Tapiero highlighted data compiled by Charlie Bilello, founder and CEO of Compound Capital Advisors.RSI hits two-year lowsAmid the gloom, not everything is pointing to a protracted bearish phase for Bitcoin specifically.As Cointelegraph has been reporting, on-chain indicators are calling for upside in droves — and historical context serves to support those demands.This week, it’s Bitcoin’s relative strength index (RSI) which continues to headline, reaching its lowest levels in two years.#Bitcoin RSI has been this low just 2 other times in the last 2 years. Looks like a bottom is near and bounce due. Let’s see pic.twitter.com/qhQ1pD8yEl— Bitcoin Archive (@BTC_Archive) January 9, 2022

RSI is a key metric used to determine whether an asset is “overbought” or “oversold” at a given price point.Plumbing the depths at $42,000 suggests that such a level really is considered too extreme by the market, and a rebound should occur to balance it. By contrast, last January, RSI was sky high and conversely well within “overbought” territory, while BTC/USD traded at the same price.“The Bitcoin RSI is on the lowest point in 2 years on the daily. March 2020 & May 2021 were the last ones. And people flip bearish here / want to short,” a hopeful Cointelegraph contributor Michaël van de Poppe commented.BTC/USD 1-day candle chart (Bitstamp) with RSI. Source: TradingViewCointelegraph noted similarly bullish hints on the monthly RSI chart last week.Hash rate recoups Kazakhstan lossesAnother blip from last week already “curing itself” comes from the realm of Bitcoin fundamentals. After hitting new all-time highs throughout recent weeks, Bitcoin’s network hash rate took a hit when turbulence in Kazakhstan comprised internet availability.Kazakhstan, home to around 18% of hash rate, has since stabilized, allowing the hash rate to mostly return to prior levels of 192 exahashes per second (EH/s).At one point down to 171 EH/s, responses to what may have reminded some of last May’s China mining ban appear to have lifted hash rate and preserved record-breaking miner participation.Bitcoin’s network difficulty, despite the upheaval, still managed to put in a modest increase this weekend and is currently on track to do so again at its next automated readjustment in just under two weeks.Live Bitcoin hash rate chart screenshot. Source: MiningPoolStats“Going up forever,” on-chain analyst Dylan LeClair commented about the classic mantra, “price follows hash rate.”For context, China’s mining rout caused hash rate to decline by 50%. It took around six months to recoup the losses.“What if…?”Someone who has long been saying that it’s high time for a Bitcoin trend reversal is quant analyst PlanB, creator of the stock-to-flow-based BTC price models.Related: Top 5 cryptocurrencies to watch this week: BTC, LINK, ICP, LEO, ONECurrently weathering a test of his creations — and the accompanying storm of social media criticism — PlanB nonetheless remains more optimistic than most when it comes to mid to long-term price action.“I know some people have lost faith in this bitcoin bull market,” he acknowledged this weekend. “However we are only halfway into the cycle (2020-2024). And although BTC experiences some turbulence at $1T, the yellow gold cluster at S2F60/$10T (small black dots are 2009-2021 gold data) is still the target IMO.”Stock-to-flow cross-asset (S2FX) chart. Source: PlanB/ TwitterHe was referring to the stock-to-flow value for Bitcoin, gold and other assets as part of his stock-to-flow cross-asset (S2FX) model, which calls for an average BTC/USD price of $288,000 during the current halving cycle.Closer to home, however, a more simplified comparison between Bitcoin this cycle and its two previous ones saw a feasible trajectory beginning with a U-turn now. What if … pic.twitter.com/te36HkFAbQ— PlanB (@100trillionUSD) January 9, 2022

A separate model, the floor model, which demanded $135,000 per bitcoin by the end of December, has now been discarded after failing to hit its target for the first time ever in November.

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Bitcoin crash ahead? Expert warns higher inflation could whip BTC price to $30K

Bitcoin (BTC) may end up falling to as low as $30,000 if the U.S. inflation data to be released on Wednesday comes any higher than forecasted, warns Alex Krüger, founder of Aike Capital, a New York-based asset management firm.The market expects the widely-followed consumer price index (CPI) to rise 7.1% for the year through December and 0.4% month-over-month. This surge highlights why the U.S. Federal Reserve officials have been rooting for a faster normalization of their monetary policy than anticipated earlier.U.S. headline inflation. Source: Bureau of Labor Statistics, BloombergFurther supporting their preparation is a normalizing labor market, including a rise in income and falling unemployment claims, according to data released on Jan. 7.”Crypto assets are at the furthest end of the risk curve,” tweeted Krüger on Sunday, adding that since they had benefited from the Fed’s “extraordinarily lax monetary policy,” it should suffice to say that they would suffer as an “unexpectedly tighter” policy shifts money into safer asset classes.Excerpts:”Bitcoin is now a macro asset that trades as a proxy for liquidity conditions. As liquidity diminishes, macro players now in the fray sell bitcoin, and all of the crypto follows.”The first interest rate hike in March 2022?The Fed has been buying $80 billion worth of government bonds and $40 billion worth of mortgage-backed securities every month since March 2020. Meanwhile, the U.S. central bank has kept its benchmark interest rates near zero, thus making lending to individuals and businesses cheaper.BTC/USD vs. Fed balance sheet. Source: TradingViewBut the collateral damage of a loose monetary policy is higher inflation, which reached 6.8% in Nov. 2021, the highest in almost four decades. So now the Fed, which once claimed that rising consumer prices are “transitory,” has switched its stance from expecting no rate hikes in 2022 to discussing three hikes alongside their balance sheet normalization.“It’s more dramatic than what we anticipated and the Fed’s pivot to a more hawkish stance has been the surprise,” Leo Grohowski, the chief investment officer of BNY Mellon Wealth Management, told CNBC, adding:”Most market participants expected higher rates, less accommodative monetary policy, but when you look at the fed funds implying a 90% chance of a hike in March, on New Year’s Eve that was just 63%.”Mini bear market?Mike McGlone, the senior commodity strategist at Bloomberg Intelligence, called $40,000 an important support level in the Bitcoin market. Furthermore, he anticipated that the cryptocurrency would eventually come out of its bearish phase as the world becomes digital and treats BTC as collateral.BTC/USD daily price chart featuring $40K-level’s history as support. Source: TradingViewThe statement arrived as Bitcoin’s drop from its Nov. 8 record high of $69,000 is now over 40%. According to Eric Ervin, chief executive officer at Blockforce Capital, the drop has primarily washed off recent investors, leaving the market with long-term holders.It could be the beginning of a “mini bear market,” the executive told Bloomberg, adding that such corrections are “completely normal” for crypto investors.Related: Bitcoin performs classic bounce at $40.7K as BTC price comes full circle from January 2021Krüger also noted that Bitcoin has already dropped too much from its record highs, insofar that it now stands technically oversold. So, if the CPI reading surprises on the downside, markets could expect the BTC price to pop and trend for a while.”Wednesday will have the US inflation data,” Krüger said, adding:”Think prices should chop around 41k and 44k until then, with an upwards skew given how strong the rejection of the lows has been.”The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Will this time be different? Bitcoin eyes drop to $35K as BTC price paints 'death cross'

Bitcoin (BTC) formed a trading pattern on Jan. 8 that is widely watched by traditional chartists for its ability to anticipate further losses.In detail, the cryptocurrency’s 50-day exponential moving average (50-day EMA) fell below its 200-day exponential moving average (200-day EMA), forming a so-called “death cross.” The pattern appeared as Bitcoin underwent a rough ride in the previous two months, falling over 40% from its record high of $69,000.BTC/USD daily price chart. Source: TradingViewDeath cross historyPrevious death crosses were insignificant to Bitcoin over the past two years. For instance, a 50-200-day EMA bearish crossover in March 2020 appeared after the BTC price had fallen from nearly $9,000 to below $4,000, turning out to be lagging than predictive. Additionally, its occurrence did little in preventing Bitcoin from rising to around $29,000 by the end of 2020, as shown in the chart belowBTC/USD daily price chart featuring March 2020 death cross. Source: TradingViewSimilarly, a death cross appeared on the Bitcoin daily charts in July 2021 that — like in March 2020 — was more lagging and less predictive. Its occurrence did not lead to a massive selloff. Instead, BTC’s price merely consolidated sideways before rallying to $69,000 by November 2021.BTC/USD daily price chart featuring death cross. Source: TradingViewBut the bearish moving average crossovers in both the instances, as mentioned above, accompanied a piece of good news, which may have limited their impact on the Bitcoin market.For instance, the Bitcoin price recovery in July 2021 came majorly in the wake of rumors that Amazon would start accepting cryptocurrencies for payments — that later turned out to be false — and following a conference, dubbed “The B-Word,” which saw Twitter CEO Jack Dorsey, Tesla CEO Elon Musk, and ARK Invest CEO Cathie Wood speaking highly in favor of Bitcoin.Similarly, Bitcoin recovered sharply from its below $4,000-levels in March 2020, primarily after the U.S. Federal Reserve announced its loose monetary policies to contain the aftermath of the coronavirus pandemic-led stock market crash.The death cross this time looks dangerousBitcoin’s latest decline reflected growing investor concern about the Fed’s decision to aggressively unwind its loose monetary policies—including the dialing back of its $120 billion a month asset purchasing program followed by three rate hikes—in 2022.Typically, rising interest rates make holding volatile assets like Bitcoin less appealing than government bonds, which offer guaranteed yields.”This is proof that bitcoin acts like a risk asset,” Noelle Acheson, head of market insights at crypto lender Genesis Global Trading, told the Wall Street Journal, adding that the short-term holders would be the “closest to the exit.”Related: Bitcoin may pass $30K September lows, trader warnsAs a result, the overall reduction in cash liquidity, coupled with the death cross formation, could trigger further selloffs in the Bitcoin market. However, that is unless the BTC price rebounds from its current support level around $40,000, the 0.382 Fib line  shown in the chart below.BTC/USD daily price chart featuring Fib retracement levels. Source: TradingView Nonetheless, a break below $40,000 may risk sending the Bitcoin price to the next Fib line support near $35,000.  The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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