Is Bitcoin Bullish or Not? Here’s what’s really going on with the BTC price

Since March 2022, traders and so-called analysts have been predicting a policy change or pivot from the US central bank.

Apparently, such a move would prove that the Fed’s only available option is to print into oblivion, further reducing the value of the dollar and establishing Bitcoin (BTC) as the world’s future reserve asset and ultimate store of value.

Apparently.

Well, on November 2nd, the Fed raised interest rates by the expected 0.75%, and stocks and crypto rallied as they usually do.

But this time there was a twist. Before the Federal Open Market Committee (FOMC) meeting, there were a few unconfirmed leaks that said the Fed and the White House were considering a “policy pivot.”

According to comments issued by the FOMC and under Jerome Powell’s presser, Powell emphasized that the Fed is aware and monitoring how policy affects markets and that the wait for rate hikes is acknowledged and considered.

The Fed stated:

“To achieve a monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

Sounds a bit pivot-y, doesn’t it? The crypto market didn’t seem to think so, and shortly after Powell made his direct comments, Bitcoin, altcoins, and stocks pulled back their brief single-digit gains.

The shock here is not that Bitcoin’s price retreated before the FOMC meeting, increased after the estimated increase was announced, and then retreated before the stock market closed. This is to be expected and I would not be surprised if BTC goes back to the lower end of $21,000 since $20,000 seems to be solidified as support.

What is surprising is that there was a hint of pivot language and the markets did not react accordingly. Let that be a lesson about buying too deeply into narratives.

In my opinion, trading with the FOMC, consumer price index (CPI) and interest rate hikes is not the way to go. Sure, if you are a day trader, have deep pockets to take advantage of those 2% or 4% moves or are an experienced, skilled professional trader, then go for it. But, as shown in the following chart from Jarvis Labs, trading the FOMC and CPI can really only cut traders up.

I am of the opinion that intraday Bitcoin price movements on a less than daily time frame are irrelevant if your motive is to go long on Bitcoin and grow your stack. So instead of focusing on micro events like how the Fed continues to raise interest rates, a policy it is committed to until inflation falls to its 2% target, let’s look at other metrics that assess Bitcoin’s current market structure and projected performance.

Related: Why Is Bitcoin Price Up Today?

On-chain data suggests it’s time to rally

On November 1, Capriole Investments founder Charles Edwards debuted a new chain value called Bitcoin Yardstick. According to Edwards, the calculation takes “Bitcoin Market-Cap / Hash-Rate, and normalized (divided by) the 2-year average” to essentially take “the ratio of energy work done to secure the Bitcoin network relative to price.”

Edwards explains that “lower readings = cheaper Bitcoin = better value”, and in his opinion:

“Today we see valuations unheard of since Bitcoin was $4-6K.”

Like Glassnode’s recent report, Edwards also believes that long-term owners have already capitulated. Citing the chart below, Edwards said:

“Net Unrealized Profit and Loss (NUPL) shows a washout in long-term owners. We have entered the capitulation zone (red) seen only once every four years previously.”

As discussed in last week’s Bitcoin on-chain update, several on-chain metrics are at multi-year lows, and there is sufficient precedent to suggest that upside gains far outweigh downside potential at the moment.

Did Bitcoin’s MACD Histogram Turn Bullish?

Another metric causing a buzz in trading circles is the moving average convergence divergence (MACD). Throughout the week, several traders cited the indicator, noting a convergence between the signal line and the MACD and the histogram turning “green” on the weekly time frame as encouraging signs that Bitcoin is in a bottoming process.

Although the indicator is not meant to be interpreted as a pure signal in isolation, crossovers on the weekly and monthly time frame, along with the histogram switching from red to green, have usually been accompanied by a steady rise in bullish momentum.

While data is unable to confirm whether a market bottom is truly in, the current readings compare to past market cycles and Bitcoin’s price action that BTC is undervalued in its current range.

BTC’s price may be in the process of carving out a bottom, but this does not rule out the possibility of occasional crypto- and stock market-related selling that could catalyze a quick dip down to the annual low.

This newsletter was written by Big Smokey, the author of The Humble Pontificator Substack and resident newsletter writer at Cointelegraph. Every Friday, Big Smokey will write market insights, trending how-tos, analysis and early research on potential new trends within the crypto market.