Bitcoin maintains its crab-like price action as it continues to move sideways in lower and higher time frames. General market sentiment turned bullish for a brief period during today’s trading session, but BTC has proceeded to return to its critical support area.
Related reading | Bitcoin notes the longest stretch of extreme fear since April 2020
At the time of writing, BTC is trading at $29,700 with a 7% loss in the last 24 hours. Prior to retesting these lower levels, Bitcoin was rejected above $32,000 and appears to be heading towards the middle of its current levels.
The first cryptocurrency by market capitalization could react to the downward price movement of traditional finance. As reported by NewsBTC, Bitcoin offers high correlation with the S&P 500 and especially higher with the Nasdaq 100.
The latter was rejected at a critical level and has been trending to the downside since the beginning of 2022. This reaction was created by the US Federal Reserve (FED) and the start of the quantitative tightening (QT) program.
Unlike quantitative easing (QE), when the Fed buys assets and its balance sheet increases, QT will make the financial institution sell $1.1 million in assets in global markets every minute, according to one Analytics By CoinBeast Media.
As a result, global markets, including the cryptocurrency industry, may come under more negative pressure. QT may not directly impact the industry, but it will play a key role in global liquidity, risk appetite, and contribute to conditions that may prevent Bitcoin from reclaiming new highs.
The Fed has more than $8.5 trillion in assets on its balance sheet. As CoinBeast points out, the last time the Fed started QT, the financial institution sold less than $1 trillion of its assets.
This led to a 3-week crash of the stock exchange which recorded a loss of 22% over that period. The report added:
This led to a shortage of dollars and a banking crisis that began in the overnight repo market in the fourth quarter of 2019. This forced Jerome Powell to end his famous QT in September 2019 and spawned the infamous “Powell pivot”.
Will history repeat and affect Bitcoin?
At that time, macro conditions forced the Fed to change its course of action. The “Powell Pivot” was followed by a massive bullish move in Bitcoin and stocks.
Today, the macro conditions are different, but they may once again force the financial institution to reconsider its strategy. In the meantime, more downsides or at least a crab-like price movement looks likely.
Related reading | Bitcoin Initially Settling Above $31,000, Bull Rally or Trap?
On the above, the economist Jan Fustenfeld He said:
Given the overall situation and the start of quantitative tightening, I am not surprised by the #bitcoin price action today. You can consider all kinds of technical analysis, fundamentals, etc., but ignore the above factors in this environment, and you are likely to draw wrong conclusions.