A challenging week for cryptocurrency investors has begun as expected. So, what could happen in the coming process? Let’s evaluate the overall events that will happen this week, which caused the drop in Bitcoin price. At the time of writing, BTC is finding buyers at $42,335 and a significant portion of altcoins have retreated to support levels.
Why Did Crypto Drop?
About 30 hours ago, we said we might see a decline in cryptocurrencies in the new week. We discuss the important developments of the week every Sunday and share our predictions by relating them to the current situation. This week, the fundamental analysis front was clearly signaling a downturn. As we announced on Sunday, the data that came on Friday made the Fed’s meeting week more critical.
We said that investors would want to enter the new week taking less risk due to the upcoming November inflation data, new interest rate decision, and long-term interest rate projection (dot graph). It happened so, BTC retreated to the level of $40,400 with voluminous profit sales.
What’s more important is that the risk of the last correction deepening clearly increases because the important threshold of $42,450 could not be protected.
What Will Happen Next?
Tomorrow, the US Inflation data will be announced. It is expected that the Core CPI will remain at 4% on an annual basis. In addition, it is expected that the headline inflation, which has fallen to 3.2%, will remain stable annually. Although the last PCE data was positive, if the CPI is announced above expectations as the employment data was bad, this will indicate that less interest rate cut can be made instead of the upcoming 100bp+.
The Producer Price Index (PPI) data for November will come on Wednesday. Since this data is a leading indicator of inflation, it is extremely important. After Powell speaks on Wednesday evening, the “Dot Plot” graph and interest decision will come. After Wednesday, the markets will start pricing the year 2024 more strongly.
If Powell remains moderate, if inflation is positive and if the three-year interest rate projections reflected in the dot graph show more expectation of a cut, $48,000 could be a reasonable target by December 31. What about in the opposite scenario? BTC probably targets $36,000.
Kobeissi wrote the following in his latest review;
“The Fed’s last statement was in the direction that hopes for an interest rate cut were ‘early’. This week, we expect the Fed to reaffirm this.”
So, the Fed is likely to disappoint and we will realize that we have already seen the local peak. However, crypto is full of surprises.
