With the US Federal Reserve expected to start tapering the stimulus programme after the Covid pandemic hit, major cryptocurrencies took a hit.

The Fed’s money-printing program had inspired many investors to buy bitcoin as a hedge against inflation, according to a report published by coindesk.com. So, if the Fed tilts the hawkish on inflation, Bitcoin might look incrementally less attractive as a hedge against dollar debasement, reported coindesk.com.

Bitcoin (BTC), the oldest cryptocurrency in the market, tumbled by 3.77 per cent to trade at $46,922.23 at 8:36am, its market cap now stands at $8,86,74,30,13,488. Its closest rival Ethereum (ETH) is down by 5.36 per cent and is now trading at $3781.93. Its market cap is now $4,48,32,55,20,043, showed coinmarketcap.com website.

Binance Coin (BNB) is down by 5.69 per cent and is currently trading at $525.74, while Cardano (ADA) crashed by 5.29 per cent to trade at 1.23$. Solana (SOL) is down by 7.99 per cent to $154.22. 

Meme Coins

Dogecoin witnessed a fall of 4.19 per cent and was trading at $0.158 at 8.36am. Rival Shiba Inu (SHIB) is down by 5.60 per cent and was trading at $0.00003341. Dogelon Mars (ELON) is down by 4.91 per cent and was trading at $0.000001117, while Samoyedcoin was trading at $0.03635 and was down by 9.60 per cent. Floki Inu (FLOKI) was down by 11.36 per cent to $0.0001378, showed coinmarketcap.com data.

Overall Scenario

The global crypto market cap is $2.14 trillion, which is a 4.67 per cent fall over the last 24 hours. Surprisingly, the total crypto market volume is up by 38.45 per cent at $96.61 billion.

The biggest gainer was Meta Dex (MDEX), which was up as of 8.46am by 733.71 per cent to trade at $23,522.16. The biggest loser was Capital.Finance (CAP); it crashed by 98.27 per cent to $33.88. 

Latest Update

The power deficit in Iceland has led to the rejection of local crypto miners’ requests to connect new mines with the power grid. Bloomberg.com reported that one of the several reasons behind this denial of power to the crypto miners could be the low level of water reserve, malfunction at the power station, and delay in obtaining power from an external source.

Meanwhile, Myanmar’s parallel government National Unity Government has officially accepted Tether as currency for local use, reported Bloomberg.

The stock markets and Bitcoin’s price performance might be hitting a bumpier road after the next Consumer Price Index release. During the year the Fed has been clear about an upcoming tapering, and now that new –and higher– CPI metrics are expected, the taper is likely to fasten its pace and the markets to suffer.

The central bank is expected to start reducing its net asset purchase month by month by $10 billion for Treasury securities and $5 billion for agency mortgage-backed securities. This has raised fear over the traditional and crypto markets as prices are expected to be affected by a reduction in the global market’s liquidity. Previous tapering scenarios have seen yields fall and government bond prices rise.

Costumers who have experienced the rise in prices this year have low expectations for the Consumer Price Index’s results to come. The red signals send a reminder of Jerome Powell’s previous words: “we are prepared to adjust the pace of purchases if warranted by changes in the economic outlook,”

Similarly, James Bullard, President of Federal Reserve Bank of St. Louis, had said in an interview with Bloomberg that they could “move faster” and speed of the taper “if it is appropriate”.

I think it behooves the committee to go in a more hawkish direction in the next couple of meetings so that we are managing the risk of inflation appropriately,

Bullard’s comments followed the U.S. Labor Department October’s report of a 6.2% yearly rise in the consumer price index, a 31-year high. This “further aggravated the market’s concerns about inflation, voices for accelerating Taper has become increasingly loud” said Huobi Research.

It is not the first policy retreat for the Fed, but it is seen as the most dramatic one, as it is a turnaround from unmatched support to financial markets. The general question now is whether it will look “appropriate” after the CPI report. If so, the markets are looking red to the experts.

Related Reading | Why Closing Out The Year Below $50,000 Could Be Bad For Bitcoin

What Happened To The Bitcoin $100k Dream?

At the beginning of November, Bitcoin dipped –falling almost by $2000– as the Federal Reserve announced it would gradually reduce the bond purchase. Powell had accepted that U.S. inflation numbers are not “transitory”, thus suggesting accelerating the taper as he saw a stronger economy and hot inflation.

There are current considerations of wrapping things up a few months earlier than initially planned. The future two-day meeting on December 14-15 will tell if the Fed will double its taper pace to $30 billion a month. A faster taper could be used to fight the surging inflation by raising interest rates earlier, but this could bring times of high volatility for the markets.

Louis Navellier, one of Wall Street’s famous growth investors, had commented:

The Fed is tapering, and this should create a correction in risk assets, of which bitcoin is a part. The more the Fed tapers, the more volatility we should see in both stocks and bonds — and yes, bitcoin, too.

Huobi Research explained that the projection behind the previous expectation for Bitcoin’s price to flirt with $100k by the end of this year “ignored the impact of external macro changes on the market.”

The Huobi report claims “the extremely loose monetary policies” –the central bank’s release of liquidity– during times of Covid was also carrying Bitcoin’s price uphill –as well as other risky assets– to the remarkable surge we saw this year. That also means the taper is “the turning point of global liquidity growth”.

As we observed during March last year, due to the shortage of market liquidity, Bitcoin price dropped by nearly 50% in one day…

The concerns about inflation have turned into a difficult landscape the future prices for various high-risk assets. However, this wouldn’t be Bitcoin’s first low, and we have seen it bounce back before.

Related Reading | Despite Red Bitcoin, On-Chain Signals Flip Green

Blood has been shed as Bitcoin dropped below $60,000 once again and hints at more downside. The first crypto by market cap trades at $60,800, as of press time, with a 5% loss in the daily chart.

Although it has seemed some recovery, Bitcoin registers a correction of around 12% from its all-time high as an increase in selling pressure caused the entire crypto market to take a dive.

Related Reading | Bitcoin Bears Are Back, Why BTC Could Even Dive Below $60K

The general sentiment in the market has flipped from extreme greed to normal greed levels, according to data from Arcane Research. Despite the correction, traders and operators remain optimistic about potential new highs.

This metric could continue to fall as Bitcoin moves at the low of a range between $58,000 to around $70,000 and the market reset. The derivatives sector is likely to be the most affected.

As NewsBTC reported, Bitcoin futures contracts across the board got overheated as BTC’s price pushed into uncharted territory. This created a lot of liquidity at the lows and a rise in funding rates.

In other words, a lot of traders took over-leveraged long positions expecting more upside, but large investors drove the price below $59,000 to take advantage of the liquidity and fill their orders.

Post-crash, funding rates have returned to neutral territory in almost every crypto exchange platform. Along with the market sentiment provided by Arcane Research, and the fact that the price of Bitcoin held at $58,6000, this suggests a potential bottom has formed, at least for the short term.

Data provided by CryptoQuant records over $33 million long liquidations in one hour as BTC’s price went below its current levels. The Open Interest (OI) decreased by 2.33% in the past day or about $350 million.

Additional data provided by Glassnode indicates that the OI for Bitcoin Futures contracts has reached a 5-month low of $711,951,837 on crypto exchange Bitmex. As seen below, a dropped in OI during September and October was preceded by more BTC appreciation.

#Bitcoin $BTC Futures Open Interest just reached a 5-month low of $711,951,837.33 on #Bitmex

Previous 5-month low of $713,112,500 was observed on 24 September 2021

View metric:https://t.co/GyObF5WOjC pic.twitter.com/bsa9S166ZP

— glassnode alerts (@glassnodealerts) November 16, 2021

Bloodbath Over, Bitcoin Ready To Moon?

However, Bitcoin whales could try to push the price down one more time to leverage the liquidity concentrated around $57,700, according to data from monitor Whalemap.

In addition, the apparent indirect correlation between BTC’s price and the U.S. Dollar (DXY Index) could create more hurdles for the bulls. The dollar recently broke above a major resistance zone and stands at a 16-month high.

This rally could have been triggered by macro-economic factors, including the start of tapering by the U.S. FED and the increased risk in the Asian markets due to the Evergrande crisis.

Related Reading | Bulls Giving Up? Massive Bitcoin Bid Wall Removed, What It Could Mean For BTC

The above adds to an already uncertain market. One thing seems true, BTC’s price must hold at $58,000 if it wants to return to price discovery in Q4, 2021.