Bitcoin has seen a correction of around 3.5% in a single day following numerous negative reports in the global and American economy from October 11th.
This correction has raised uncertainty regarding the anticipated appreciation in October, marketed with the narrative ‘Uptober,’ and it has left investors concerned about Bitcoin’s movement through the end of 2023.
Bitcoin Falls After FOMC Meeting Publication
From news of war to the FOMC meeting results, most risk assets worldwide are currently experiencing negative sentiment due to the high level of economic uncertainty.
One factor exacerbating this situation is the publication of the recently held meeting results at 02:00 AM WITA (Western Indonesia Time) early in the morning.
FOMC is a committee within the Federal Reserve responsible for helping determine the appropriate monetary policy stance for the U.S. economy. The committee is in charge of open market operations, which function to adjust the money supply to align with inflation targets and the economic needs of America.
In the meeting’s publication, one of the main narratives discussed is related to determining the appropriate benchmark interest rate through the end of the year.
It’s reported that the majority of FOMC members agree that the benchmark interest rate should rise in the coming months, especially through the end of the year, to combat the continually rising high inflation. Other FOMC members concur that inflation is high but still under control, so the benchmark interest rate doesn’t need to rise but isn’t ready to decrease either.
Both perspectives indicate that the U.S. economy hasn’t improved yet, and, as a result, the benchmark interest rate is not ready to decrease. The economic condition is further reflected in the inflation rate, which remains at 3.7%, far from the Federal Reserve’s target of 2%.
Therefore, there is a possibility that an increase in the benchmark interest rate could still occur, especially through the end of the year, which is causing most risk assets like Bitcoin to decline at the moment.
U.S. Economic Data Schedule of Publication
Alongside the FOMC meeting publication, the United States will also release economic data at 20:30 WITA.
Some of this data includes annual and monthly core and general inflation data, as well as monthly CPI figures and social assistance fund data.
Currently, there are predictions from economists that annual core and general inflation data will move lower compared to last year. However, given the state of the economy and government spending, especially on aid to other nations, this year’s inflation figures might be higher, and those predictions could be incorrect.
The possibility of an incorrect prediction is also driven by monthly inflation figures predicted to remain stagnant or increase, along with social assistance funds and CPI predicted to rise.
These data points indicate that the prices of most essential goods are still relatively high, and people are struggling to meet their basic needs because everything is expensive. The reality of expensive goods is a result of the declining purchasing power of the public due to the continuously increasing supply of the U.S. Dollar.
The mismatch between monetary and fiscal policies is also causing inflation to continue rising, which, in the long run, worsens the U.S. economy’s condition.
The long-term deterioration of the U.S. economy affects the U.S. Dollar and financial markets because most financial assets still have a significant transaction volume in U.S. Dollars, including cryptocurrencies.
Due to all these conditions, in the last few days, the majority of cryptocurrency assets have been declining, especially yesterday when Bitcoin dropped by about 3.5%.
Analysis of Bitcoin Movement
However, tonight, there is a possibility of a sudden positive sentiment for Bitcoin and most risk assets, stemming from inflation data.
If inflation data rises, it is likely that the U.S. Dollar will weaken, and most risk assets, including cryptocurrencies, will rise. This is because of the negative correlation between these two asset categories, where the U.S. Dollar falls into the safe-haven asset category, while cryptocurrencies fall into the risk asset category.
Bitcoin Sentiment Data from Coinglass
According to data from Coinglass, at present, the majority of traders are more inclined to open long positions, creating a narrative that most traders believe in the appreciation of Bitcoin, especially tonight. This suggests that most traders have faith in the persistently high inflation in the United States, even higher than last year, which could be a positive sentiment for Bitcoin.
BTCUSD Daily Chart
If indeed there is a price appreciation, it is highly likely that Bitcoin will continue to recover and return to the strong appreciation zone it has been in since September 2023.
However, if inflation does, in fact, decrease as predicted by economists, there is a possibility that Bitcoin will return to the strongest support level in 2023, around the $25,000 mark. Such a decline would eliminate hopes of a substantial appreciation by the end of the year and potentially initiate a period of consolidation as seen in recent months.
This movement would also negate the “Uptober” narrative that has been eagerly anticipated by the majority of crypto enthusiasts in recent weeks.
The current uncertainty is generating high volatility, leading most investors to opt for asset protection by selling, as evidenced by the ongoing corrections with low trading volumes. Therefore, investors and traders are advised to remain vigilant, avoid FOMO (Fear of Missing Out), and continue to utilize risk management strategies in light of the information circulating in the market.