Extreme volatility ahead of FED interest rate hike

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The uptrend in crypto market continued last week, with the overall market cap growing by 0.9% to reach $1.084 trillion. While the S&P 500 and Nasdaq also saw higher gains(WoW), the earnings performance of big tech and large cap companies continues to be a significant factor in the performance of these indices. This week, the release of PCE data and the upcoming Federal Funds rate hike in first week of February are expected to lead to increased market volatility. Additionally, several moderately significant data releases are also scheduled before the rate hike. A lot of altcoins have started gaining good strength, opening up a lot of opportunities in near term.

Source: Tradingview

Bitcoin Price Overview

Bitcoin has surpassed the 200-SMA (Simple Moving Average) on the daily time frame chart . Therefore, a pullback could start between about 23,000 USD and 24,500 USD. Overall, the weekly chart is unmistakably bullish and points to further price increases in Q1-2023 to levels above $25,000 per unit. The initial pullback should be absorbed by the support region between 18,000 and 19,500 USD. Given the brutal 14-month bear market and the availability of numerous instruments and derivatives for trading Bitcoin, there were probably more short sellers than ever at the November low. These short sellers, who are currently steadily going further in debt, will soon turn into buyers and could easily drive Bitcoin prices up to 25,000 USD. Since the beginning of the bear market in November 2021, sentiment has significantly improved for the first time. The Crypto Fear & Greed Index is currently showing a fairly balanced or neutral sentiment at 52 points.

Source: Tradingview

Ethereum Price Overview

Similar to Bitcoin chart, the Ethereum has surpassed the 200-SMA on the daily time frame chart (Simple Moving Average). The fact that the bulls have not surrendered ground to the bears is a good sign for Ether’s (ETH) price, which is experiencing rejection at the $1,650 resistance level. This suggests that short-term investors are holding onto their positions because they believe the upward trend will continue. A break and close above $1,650 could signal the beginning of the climb to $1,780. This level might once more serve as resistance, but if bulls prevent the price from falling below $1,650 during the following pullback, the probability of a rally to $1,950 rises. If the price reverses from its current level and falls below the $1,250 price level, this bullish outlook may become invalid in the near future.

Source: Tradingview

Fundamental Updates

The Personal Consumption Expenditures (PCE) data, which tracks consumer spending, is set to be released on January 27th. The recent increase in prices has likely led to a reduction in overall spending, however, the holiday season has traditionally been a period of high consumer spending. Despite this, the rising prices have led to a decline in spending in certain areas, while some geographies have seen an increase. The PCE data has recently been trending downwards, but any reversal in this trajectory could result in medium-term volatility in the market.

Source: Investing.com

The upcoming data releases this week will have a direct impact on the Federal Reserve’s decision regarding the next Federal Funds Rate hike. Initially, there were expectations for a 50 basis point hike, but in recent days, there has been a shift towards a more dovish stance, with over 99% of expectations for a 25 basis point hike. Despite the slow improvement in economic conditions, the Fed has made strong decisions without hesitation. Similar to the US GDP data, the upcoming rate hike will set the tone for the next quarter in the markets, as it will solidify any potential changes in the Fed’s stance.

Source: Icmewatchtool

Bitcoin returns were 7.36% for this week. The Alpha Blue Chip Focused Strategy returns were 4.4% during the same period (19 JAN – 26 JAN). The Top Cap Digital Assets Strategy and Arbitrage and Balanced Opportunities Strategy returns were 12.79% and 4.05%, respectively.

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