Bitcoin managed to hold its price above support at $40,000 and recovered reaching above $43,000 due to activity from bulls. Technical indicators and cryptocurrency onchain activity indicate a gradual weakening of sellers' positions. These factors can be perceived as the initial stage of recovery of major cryptocurrency quotes. However, bitcoin's success may be offset by the Fed report and the IMF statement.
The Fed's conclusions should be expected within two weeks, but I assume that regardless of their statements, bitcoin's price is unlikely to change due to the market's readiness for pessimistic conclusions. The situation with the International Monetary Fund looks tenser, as its representatives said that bitcoin and the cryptocurrency market may cause destabilization in stock markets. IMF officials linked this fact to the record high level of correlation between the leading cryptocurrency and the S&P 500 Index.
The international regulator believes that the rise in popularity of cryptocurrencies and company stocks has increased due to the difficult economic situation in the world and the growing interest in high-risk assets. The IMF statement does not imply that the multi-thousand-dollar growth of bitcoin over the past 5 years had something to do with it. However, IMF officials believe that the cryptocurrency reaching a local low could have a negative impact on investments in stock markets. As a solution to the problem, the Fund suggests creating a set of rules to regulate the cryptocurrency industry.
In general, the IMF's policies and statements look consistent, and it is likely that in 2022 the issue of mass regulation of the industry may appear. However, it will be a negative signal for the cryptocurrency market. The regulations imply increasing centralization of the industry. One of the main reasons for the explosion of interest in cryptocurrencies has been the lack of meticulous regulation that has consumed the securities market. In the long run, if this keeps investors safe and ensures large-scale acceptance of cryptocurrencies as a class asset, the road to all-time highs will be hard.
Notably, the cross-national regulation of the crypto industry does not exclude regulations on a national scale. In Thailand, for example, a specially created commission has announced that an extensive list of regulations for digital assets will be ready for approval at the end of January. Several types of taxation of crypto-assets are expected to be adopted, which could set a precedent that negatively affects the attraction of new investors and investments in the cryptocurrency market.
Despite this negative background, major cryptocurrencies held key support levels. All market attention is focused on bitcoin, which as of 14.30 managed to break through and fix above $43,000. The steady recovery of the BTC/USD pair quotations is accompanied by an increase in buying activity and accumulation of volumes. According to Glassnode, investors with wallets of 1,000 BTC or more have begun to actively accumulate bitcoins after the asset broke through $50,000. Mining companies have also launched a period of accumulation of volumes. All the above indicates preparations for a recovery towards the $45,000-$50,000 range.
Bitcoin's dominance index is near a swing low of 40. This suggests that in the next month and a half we may see an altcoin season, which will subsequently be interrupted due to bitcoin's full recovery. The main cryptocurrency has reached a local bottom and managed to form a strong support zone. In the near future, I expect the start of the recovery period and fixation in the range of $42,000-$50,000. However, I keep in mind a potentially negative Fed report and the subsequent increase in volatility, which could send bitcoin gain liquidity in the $38,000-$40,000 range.