Omicron Batters Crypto Market, Bitcoin Loses Grip

Bitcoin was no refuge on a day when investors needed a place to hide while the mutant virus battered global financial markets.

The new strain of the virus was first reported in South Africa is being investigated in countries throughout Europe and the Middle East.

Over 60 new COVID19 infections are being investigated in the Netherlands, and three cases of Omicron have been reported in Israel from people who haven’t traveled abroad.

Across the world, governments are tightening travel restrictions to southern Africa.

US travel advisories are being upgraded to warnings, and the U.K. is adding four more nations to its “red list.” South Africa is expected to announce stricter lockdown measures in response.

During the rout in world stock markets caused by a potentially dangerous COVID19 variant, the world’s biggest crypto dropped almost 10% to $54.3K on Friday afternoon.

Despite its own history of big swings and speculative frenzy, Bitcoin proponents are unable to claim that the token can be used as a hedge against volatility in more traditional risk markets.

The correlation between the flagship crypto and risky assets like stocks has been on the rise since the beginning of the year.

In other words, when stocks fall, Bitcoin is likely to fall as well, decreasing its usefulness when hedged against volatility.

Bitcoin enthusiasts have suggested that, because of its limited supply of 21 million tokens, it can act as a hedge against inflation.

The world’s most popular crypto would make sense if that is the narrative, as COVID19-related news might have fueled concern about the stability of the global economy.

Bitcoin’s recent gains can be explained by roughly half inflation fears and half by exuberance and momentum trading, according to market pundits.

However, there is no way to tell just yet how Bitcoin and other crypto assets will fit into a portfolio if the recent trading action is any indication.

Regulatory concerns and waning interests in U.S. exchange-traded funds tied to Bitcoin futures have also put a damper on bitcoin, which hit an all-time high of $69K earlier this month.

Crude Oil Suffers 7th Worst Day Fall In History

Global oil markets turned red quickly after Black Friday. WTI futures in New York and Brent in London plummeted more than 12% from their pre-Thanksgiving closes during the crash.

They both recovered somewhat by the close, but for Brent Crude Futures, it was still the seventh-worst one-day drop in history. Brent crude settled near $73 a barrel.

In the south of Africa, a number of countries have banned flights from their countries.

At a time when markets expect the Fed to increase the pace of tapering, this comes at the right time. Tightening expectations may be revisited.

In a market run for cover, G-10 government bond yields fell everywhere and across all of the curves. As risk aversion took hold, safe-haven assets were sought out.

In the beginning, stocks dropped due to fears of lockdowns and travel bans, but other factors, such as anemic volumes following the holidays, exacerbated the selloff.

From European diesel trades and time-spreads to the price of oil today compared to oil tomorrow, to opaque options markets, the panic spread everywhere.

Post-Thanksgiving holiday conditions with lower liquidity and a breakdown of technical support levels have contributed to the price drop.

Earlier in the week, the market had already been unusually volatile. In an effort to curb soaring energy costs, the U.S. and other top oil consumers released supplies from emergency reserves on Tuesday.

The OPEC+ cartel, led by Saudi Arabia, had responded by saying it may abandon plans to increase production. London’s benchmark Brent price surged back above $80 a barrel.

Crude oil prices plunged as U.S. futures broke through key technical levels — the 100-day and 200-day moving averages.

On a day when many market participants were absent, algorithmic computer-driven trades achieved the upper hand.

Those who are expecting a quick recovery of prices and volume after the U.S. market returns after the holiday consider this a buying opportunity. Long-term prospects are favorable.

U.S Dollar Gains For A Fifth Straight Week

A newly discovered variant of COVID-19 dampened investors’ risk appetite Friday morning, causing the dollar to drop but losses to be minimized.

As of early Friday morning, the US Dollar Index rose from daily lows to 96.69, paring intraday losses to its highest level since July 2020.

Based on the bearish MACD signals and the greenback’s ability to rise beyond 96.9, the greenback’s correction from intraday low seems to have a limited life.

The bears remain hopeful due to the trend-reversal suggestive candle and MACD signals. An ascending support line from November 09, near 96.65, and a clear downside break of the 20-SMA are necessary for the seller to enter.

After reaching its highest level in nearly 17 months on Wednesday, the index moved further away from 96.938. Nevertheless, it gained 0.73% on the week and is on course for its fifth consecutive weekly gain.

Minutes from the Fed’s Nov. 2-3 meeting helped boost the dollar on Wednesday, as it indicated that the Fed had become increasingly concerned about rising inflation.

Several policymakers have said they are willing to speed up the tapering of their bond-buying programs if inflation remains high and if interest rates are raised more quickly.

Wednesday’s data showed the number of U.S. layoffs was at a 52-year low, consumer spending rose more than expected in October, and inflation was on the rise.

The euro climbed 0.16% against the dollar to $1.121, a slight recovery. So far this month, it has still lost about 3% due to expectations that the European Central Bank will be more dovish than the Fed, as well as a new wave of European COVID-19 regulations.

In light of the fact that the DXY (dollar index) is heavily skewed toward Western European currencies due to an aggressive Fed and fourth wave in Europe, the DXY looks very bid.

According to a survey released Thursday, a spike in Coronavirus infections in Germany and unusually high inflation rates are affecting consumer confidence in Europe’s largest economy.

The central bank of Sweden left monetary policy unchanged, predicting an easing of inflation next year. The bank has penciled in its first-rate hike after the pandemic for the end of 2024.

Crude Oil Slumps, COVID-19 Stages A Big Comeback

In the weeks leading up to the OPEC+ meeting on production policy next week, Brent oil plummeted due to increased COVID-19 cases and a new strain.

Crude prices were swept up by a wave of caution in global markets as London futures dropped toward $80 a barrel.

In Europe and the U.S., the number of virus cases is soaring, while U.K. authorities are temporarily banning flights from some southern African countries and placing travelers in quarantine over concerns about the new strain.

While market analysts expect OPEC+ to continue its tapering strategy, if the new variant proves problematic in the coming days, it may decide to pause the monthly increments.

A coordinated special petroleum reserve also fueled a near 3% decline in the oil price on Friday.

According to reports, President Biden’s administration announced that 50 million barrels of oil would be released through partnerships with Britain, Japan, South Korea, India, and China; a total of 70-80 million barrels.

As a result of the unprecedented move by the U.S. and other nations to tap strategic stockpiles in order to tame rising energy prices, OPEC+ meets Dec. 2 to decide production policy for January.

While delegates from the cartel have indicated that supply might need to be held back, some analysts believe reducing quotas will undermine the group’s claim of stabilizing markets for the greater good.

It must also consider internal projections that the reserves release will exacerbate a surplus it expects to reach early next year. The alliance has been restoring 400,000 barrels a day to the market each month.

Nevertheless, the International Energy Agency has accused them of creating “artificial tightness” and urged a return to supplies as soon as possible.

The underperformance of some OPEC members has hindered the group’s ability to meet its expanding output targets. Angola and Nigeria, two African nations struggling with production losses, failed to deliver half the increase the group had planned for October.

Bitcoin Fights for Survival In A Parabolic Bull Market

Bitcoin was trading in a tight range of around $57k on Thursday morning despite major crypto assets being lower. Based on technical indicators, Bitcoin’s downside is capped at $53k, which suggests buyers will remain active towards $60K resistance.

As part of the U.S. Thanksgiving holiday on Thursday, strong dollar amid reports of an Indian Crypto ban trading volumes continue to decline. Although some analysts expect volatility to increase as November draws to a close in the bitcoin and ether options markets

Prices could move sharply over the next few days due to rising volatility, which could discourage buyers from holding onto positions for an extended period of time.

Whales deposit Bitcoins at exchanges. Curiously, the exchanges have continued to outflow money, which has resulted in the reserves remaining near their lowest levels since mid-2018.

In a report somewhat contradictory, Glassnode said long-term holders may not be spending as much as they were and are therefore more likely to be adding to positions than exiting them.

There are two confluences on the chart from a technical perspective: the first is the 38% Fibonacci retracement level, and the second is the trendline that dates back to March 2020 and serves as support.

Once the level is successfully backtested as support, it is possible that the uptrend will resume. On the other hand, the 50-day MA (*$60.6K), as well as $60K, seem to be the main immediate resistance levels.

Bears might still have some runway left due to the constant trading volume during this correction. This calls for caution.

As the RSI is making higher lows on the 4-hour chart, there are signs of bullish divergence, even though the RSI is falling on the daily time frame (but hasn’t reached oversold conditions yet). In order to confirm it, Bitcoin must hold above $53K and rise meaningfully.

AS Monaco, A French Football Club, Adopts Crypto

Chiliz, the leading blockchain company for the sports, announced that AS Monaco will launch a Fan Token on the fan engagement and rewards app Socios.com.

The club is based in Monaco, but competes in the French league system. Monaco has won eight league titles, five Coupe de France trophies, and the UEFA Champions League in 2004. It is one of the top clubs in French football.

A variety of games, competitions and quizzes allow fans to compete with others across the globe, compete on global leaderboards, and earn rewards, benefits, and experiences on the way. Token Hunt, a geo-location, augmented reality feature by Socios.com, will also be available to fans.

Socios.com also recently added to its offering for Fan Token holders, launching the first ever live ‘in game’ NFTs in collaboration with AC Milan, Valencia and S.C. Corinthians.

Besides the aforementioned team, Socios.com partners with Paris Saint-Germain, FC Barcelona, Inter Milan, Juventus, Napoli, AS Roma, Valencia, Atlético Madrid, Manchester City, Arsenal, and many others. Socios.com’s network of sports properties also includes the UFC, F1, 25 NBA teams, as well as leading teams in hockey, esports, and cricket.

Details about the launch date, price and supply of the $ASM Fan Token will be revealed shortly

Oleg Petrov, Vice President and CEO of AS Monaco, said: “As part of the Club’s digital development, finding new forms of engagement with our international fan community is a priority.

“We are excited to be able to interact with our fans in a whole new way with the creation of the $ASM Fan Token, allowing them to experience new things. We are pleased to collaborate with Socios.com, a pioneering and industry-leading company with expertise in some of the world’s most prestigious sports organizations.”

“AS Monaco represents more than just a successful football club for the principality. It stands for cosmopolitanism and has a huge following worldwide,” said Alex Dreyfus, CEO of Chiliz and Socios.com.

“The Fan Tokens will allow the club to connect with their global community of fans in a way they never have before, offering their fans unprecedented opportunities to engage and reward them on Socios.com.”

Crude Oil Rampages Past One Week High

Despite an effort by leading oil consumers to cool the market, oil prices rose to a one-week high on Tuesday.

To cool prices after OPEC+ producers repeatedly ignored calls for more crude oil, the United States said on Tuesday that it would release millions of barrels of oil from strategic reserves in collaboration with China, India, South Korea, Japan, and Britain.

After years of falling investment and a global recovery from the COVID-19 pandemic, analysts believe the effect on prices will be short-lived.

WTI crude oil rose 2.3%, to breach $76.4 level and retest previously broken neckline at $78.95, ending the gains at this level, maintaining the negative effect of this pattern.

Similarly, the stochastic shows clear negative signals, which support the likelihood of bouncing bearishly to resume the correctional bearish trend.

It is therefore forecast that negative trades will be observed in the upcoming sessions, starting with testing the $76.4 level again, while breaching the $78.95 and $79.85 levels will stop the correctional bearish scenario and lead the market to regain its main bullish trend.

For Brent, it was its best close since November 16 and the largest percentage gain since August. Brent also went to its highest premium over WTI since mid-October.

Since hitting a three-year high of $86.7 on Oct. 25, Brent prices have fallen over 10% as a result of discussions of a coordinated release of reserves, a strong dollar, and the potential impact of the fourth wave of COVID-19 cases in Europe.

In mid-to-late December, the Biden administration announced it would release 50 million barrels from the U.S. Strategic Petroleum Reserve (SPR).

No one would be surprised if (OPEC+) scaled back their production plans, OPEC noted in a coordinated SPR release that was less than expected.

Russia has so far rebuffed repeated requests from Washington to boost oil production by the OPEC+ alliance, which includes allies such as the Organization of the Petroleum Exporting Countries.

Energy Minister Suhail Al-Mazrouei says UAE has no reason to increase contributions to global markets any time soon. He says the UAE’s technical data gathered ahead of an upcoming OPEC+ meeting in December indicates an oil surplus in the first quarter of 2022

Gold Bugs Face Danger From U.S Federal Reserve Bank

The price of gold fell for a fifth straight session, dropping to its lowest level in about three weeks, breaching the psychologically important value of $1,800 an ounce again.

The December gold contract finished at $1,783.80 an ounce, its lowest level since November 3.

In the aftermath of Jerome Powell’s re-nomination, real yields have spiked, alleviating some inflation concerns, and gold prices have suffered.

Rate hikes are now expected in June, possibly sooner, and up to three next year. In a few weeks, the Fed dot plot may confirm those expectations.

The US president, Joe Biden, nominated Federal Reserve Chair Jerome Powell to a second term and Fed Governor Lael Brainard to the vice chairmanship.

The Fed policymakers on Monday emphasized their commitment to reducing inflation pressures, with their remarks prompting an increase in the odds of a Fed rate hike, nominal Treasury yields, and the US breakeven inflation rate – a measure of forward-looking price expectations.

In the end, US real yields have risen dramatically. The drop in real yields in recent weeks has been a major catalyst for gold prices. However, that catalyst has now been ripped apart.

Although US inflation rates are likely to remain elevated over the coming months, which might prevent gold prices from falling sharply, the Fed’s renewed focus on combating inflation with a faster tapering schedule and possible rate hike sooner than anticipated might prevent gold prices from further rallying.

In contrast to other asset classes, gold prices are historically correlated with volatility.

The gold market tends to benefit in periods of higher volatility, unlike other asset classes such as bonds and stocks that dislike increased volatility. Higher volatility signals more uncertainty about dividends, coupons, etc.

U.S Dollar Powers Up On Fed’s Status Quo

After Powell’s nomination for a second four-year term was announced by President Biden, the dollar touched a 16-month high against the euro on Monday, and the euro was also hurt by an increase in COVID-19-related cases in the region.

At the time of writing this report, DXY bulls were hovering above 96.5 index points.

According to the White House, Lael Brainard, a member of the Federal Reserve Board, will be vice-chair.

The reelection of Powell suggests a less dovish monetary policy outlook than one under Brainard

With Powell remaining as the Fed Chair, it appears that there is greater scope for rate hikes, and the dollar has benefited from that.

Holders of long positions from lower levels may wish to use the June slope as a means of determining when/where to trail stops up.

It might be a good idea to wait until the DXY tests support (96) or at least consolidate above it for a few days before entering.

Based on the view outlined above, bearish bets aren’t appealing at this time given that support and trend aren’t favorable at this time.

To generate some selling interest, hard breakthrough support and a failure on a rally would be needed. It will still take some time to turn the trend bearish even then because the trend is still steadily higher.

In consequence, precious metals should suffer in the coming months as the USD Index takes the lead.

A short-term drop to 95 is not ruled out as the USD Index approaches overbought territory.

However, it’s more of a possibility than a foregone conclusion. It is likely that a short-term pullback will be a correction within a medium-term uptrend, and the greenback’s medium-term outlook remains robust.

Minutes of the Fed’s November 2-3 meeting will be released on Wednesday, which will be analyzed for any new signs that the Fed is becoming more concerned about persistently high inflation.

Despite a quickening economic recovery and raging inflation, Federal Reserve officials Richard Clarida and Christopher Waller suggested accelerating stimulus tapering.

A Tug-Of-War Between OPEC+, Emerged Markets

The price of crude slipped ahead of an anticipated announcement by the U.S. on release of reserves, with OPEC+ warning that if consumers go ahead with the move, crude will not be restored to the market as much as it had been.

After rising nearly 1% on Monday, New York crude oil futures fell toward $76.8 a barrel. People familiar with the plans said that the U.S. may announce the release on Tuesday, along with other nations.

U.S oil had been declining since it formed a bearish engulfing candlestick about two weeks ago, when it was trading at $85 a barrel

During the time period August 22nd to October 25th, oil pulled back to 38.2% Fibonacci retracement.  On a 6 hours time frame, the price pattern targets the 50% retracement level from the same timeframe, which is also below $74 a barrel.

It would be an unprecedented effort by the world’s most powerful economy  to drive down prices in conjunction with India, Japan, and South Korea. In addition, China said it was tapping reserves.

It remains to be seen whether other nations announce simultaneous announcements, but if Biden can announce other nations are on board, including China and Japan, that is all the Announcement Effect needs.

White House officials are considering releasing 35 million barrels of oil over time, although the situation remains fluid and plans could change.

Potential SPR releases and further COVID-19 restrictions this winter might be enough to convince OPEC+ to pause supply increases

Under current market conditions, OPEC+ delegates think it is unjustified to release millions of barrels of oil. They may reconsider their plans to add more oil next week. Covid-19’s resurgence is raising concerns about demand in the U.S. and Europe.

In addition, the oil price situation is highly uncertain. As long as the whole thing isn’t just a battle to scare the traders and push down prices without actually going anywhere, it’s all too possible that President Biden will talk tomorrow about the economy and manage inflation, which will be a big topic.

Shiba Inu is relegated to 12th place by Avalanche Crypto

As a result of an agreement related to improving U.S. disaster-relief funding, the Avalanche cryptocurrency has shot up to 11th by market value, and above Shiba Inu.

According to a blog post from Ava Labs, the Close As You Go platform will make emergency funding more secure, faster, and more accurate while streamlining disaster reimbursement applications for state and local governments.

With a market-value ranking of about $29 billion between meme coins Dogecoin and Shiba Inu, Avax had reached a record $144 on Sunday before drawing some losses to trade around $133 amid bearish sentiment seen in the crypto market.

Following last week’s announcement that Ava Labs was partnering with Deloitte to build more efficient disaster relief platforms, the share price surged.

The faster, cheaper Ethereum competitors are also doing well. There’s a significant wealth effect as well as an abundance of opportunistic capital.

AVAX could however reach much higher levels of investment and usage depending on the level of public and private sector acceptance. In 2022, AVAX may become one of the top 10 most valuable cryptos by market capitalization.

VAX uses a PoS protocol or Proof of Stake, that is environmentally friendly. Proof-of-Stake protocols use far less energy and are healthier for the environment than Proof of Work protocols, which are used to mine crypto like Bitcoin.

Increasingly, even crypto miners that use renewable energy are being criticized, with critics noting that this energy could be used to reduce the burning of fossil fuels. In their energy-intensive mining operations, PoS protocols consume a fraction of the energy consumed by PoW protocols.

The price of Avalanche has doubled in the past four weeks, and it has risen by over 3,000% over the past year. Crypto assets, on the other hand, can be highly volatile, and even those that reach the top tier of market value can experience significant fluctuations.

It was announced in September that the Avalanche Foundation had raised $230 million through a private token sale, which included Polychain and Three Arrows Capital — who also contributed $200 million or more to Blizzard’s fund for Avalanche development.

Downside Risks Persist, Bitcoin Stalls Below $58k

As crypto analysts looked ahead to the week ahead, bitcoin continued to drift below $58K, as the strong dollar and profit-taking led to a week of potentially volatile trading activity. Ether held steady above $4,1K over the weekend.

As bull markets progress relative to other markets, older, more experienced sellers continue to sell, and newer, less experienced buyers absorb the supply.

A rising price will allow more HODLers to reach their target sale price. This leads to more coins being sold, opportunity cost being realized, and Reserve Risk on the rise and peaking at blow-off tops.

Furthermore, the current drawdown can also be attributed to leveraged long positions being liquidated and weak hands panicking selling mostly newer coins as a result of the current market conditions.

Long-term holders and miners, on the other hand, have remained steadfast and do not appear to be interested in selling at these prices.

In addition to checking out how holiday shoppers are reacting to the fastest consumer price hike in three decades, those tracking bitcoin as an inflation hedge will also keep a close eye on bitcoin prices as they rise.

In addition, supply-chain bottlenecks delay deliveries of some items while retailers are discouraged from offering deep discounts.

It is expected that U.S. President Joe Biden will announce his pick to lead the Federal Reserve this week.

Regulatory and monetary policy implications could arise from the announcement, despite the fact that some experts believe the two top candidates – current Chair Jerome Powell and Fed Governor Lael Brainard – hold so similar views there may not be much impact.

Bitcoin’s price remains confined to the pivotal $58k level over the weekend, with no signs of a break from the recent market pattern.

Price retracement to $53k is possible if prices fail to hold above $58.8K. Higher prices could trade as high as $61k, but gains will likely be limited to around $64.8k.

U.S Dollar Propels With COVID-19 Staging A Big Comeback

In London on Monday, the dollar gained against the euro, remaining near 16-month highs. Investors also turned to the U.S. dollar as a safe-haven currency because of concerns over the growing number of COVID-19 cases in Europe.

The U.S. Dollar Index, which measures the value of the greenback against a basket of other currencies, rose 0.15% to 96.175 index points. The index was still nearly at a 16-month high struck the previous week of 96.266.

The U.S. currency also gained from bullish remarks from U.S. Federal Reserve officials.

The Federal Reserve’s Richard Clarida and Governor Christopher Waller suggested on Friday that accelerating asset tapering could be appropriate as the economy recovers and inflation rises. Early rate hikes are also possible as the economy recovers.

$1.127 was the euro’s price, down 0.23% at the early hours on Monday. As a result of growing restrictions and tensions across Europe, the EUR-USD has gained a lion’s share of attention from clients looking for a play.

In this environment, short EUR remains attractive for momentum and trend followers

With the prospect of an early Fed policy tightening, the US dollar was further strengthened by increased COVID-19 jitters.

Austria announced it would be the first country in Western Europe to impose a full lockdown amid an outbreak of infections, and Germany is expected to follow.

Moreover, this further enhanced the value of the greenback as a safe-haven currency and undermined the shared currency, which was also undermined by market expectations for tighter policy from the ECB.

A full lockdown in Austria began on Monday in response to the surge of COVID-19 cases. According to Jens Spahn, German health minister, vaccinations alone won’t be able to stop the spread of disease.

The safe-haven currency can extend its recent rally this week and set a new 2021 high… further strong inflation in the U.S. will further drive up the market pricing of Fed rate hikes and the dollar momentarily.

Oil On A 4-Week Losing Streak

A new COVID-19 lockdown sparked demand concerns just as industry players indicated a return to supply on Friday, sending oil prices to a six-week low.

As a result, the benchmark U.S. price for oil plunged more than 4% to $75 a barrel, the lowest since October 7.

On Friday morning, crude traded in the green but slid into negative territory as a result of Austria’s lockdown.

This year’s oil recovery has been driven by demand rebound, so any indication that this might thaw would spook investors.

People aren’t moving about and businesses are closed during lockdowns, which saps demand for petroleum products.

The measures may tip the market into oversupply if they extend beyond Austria to other parts of Europe or elsewhere.

A move below $80 could deepen the correction, possibly pulling the price back towards the mid-$70 region if other countries follow Austria’s lead; the market remains fundamentally strong, but lockdowns pose a risk now if other countries follow Austria’s lead.

The December contract expires today, while the January delivery contract, which is more actively traded, dropped 3.8% to $75.4 per barrel. As of Oct. 1, Brent crude futures hit a low of $78.1, the lowest level since Oct. 1.

A fourth consecutive week of losses for both crude oil benchmarks will be the longest losing streak since March 2020.

Gas prices are being relieved at the pump, possibly due to seasonal changes in driving habits, but a continuing tight supply of crude oil will most likely keep them fluctuating rather than dropping permanently.

The decline for oil on Friday was its largest since July, but it has been trending lower over the last few weeks.

Gas prices are hovering around a seven-year high, which has prompted the Biden Administration to explore ways to ease the consumer burden caused by high oil prices. Tapping the Strategic Petroleum Reserve is one option.

From the summer through the fall, the US has publicly probed the oil market, and in particular, OPEC+, to alleviate supply and reduce prices, and other importing countries such as China, India, and Japan are joining the chorus.
Despite this, analysts have noted that releasing oil from the SPR wouldn’t have a significant long-term effect.

Bitcoin’s Winter Strike With Extreme Volatility

Over the past two weeks, Bitcoin has lost almost 20%, demonstrating the extreme volatility of the crypto market.

On the daily price chart of the flagship Crypto, upside momentum continues to slow, suggesting consumers have continued to take profits.

The relative strength index on the daily chart is not yet oversold, which suggests more downside is possible in bitcoin for the foreseeable future.

At $53k, the 100-day moving average could attract buyers in the same way it did in late September when the price began to recover.

While traditional markets are concerned with moves on this scale, it is business as usual in Bitcoin ecosystem which has largely retained its bullish conviction. In early London trading on Friday, the largest cryptocurrency slipped below $56.5k for the sixth consecutive day.

Crypto corrections are nothing to worry about. In light of how far the market has come in recent months, a break to $50k would be relatively minor considering how much it’s dropped from the highs.

After prices skyrocketed 40% in October, some analysts say a sharp decline is normal. China’s crackdown on crypto and new tax reporting provisions in the U.S. that are viewed as unfriendly by crypto investors have soured sentiments as well.

Interest rates rose and the system was drained of liquidity during 2016/17 Bitcoin winter, so crypto lost its wind.

It is not uncommon for cryptocurrencies to experience price swings of 20% or more.

The cryptocurrency fell more than 50% by late June after hitting a record high of almost $65,000 in early April. Within a couple of weeks, the price dropped about 25% from its peak of nearly $53,000 in early September.

Investors in digital assets are sometimes unfazed by pullbacks as large swings are expected. Though such arguments are controversial, some people see Bitcoin as a modern-day inflation hedge and store of value.

Reports On Interest Rates Spike Trigger A Strong Dollar

On Friday morning, the greenback gained against the euro for the second time this week. With inflation on the rise, central banks are now expected to raise interest rates.

In the past week, the euro fell by 0.6%, pushing the dollar to its highest level in 16 months. Although it is still vulnerable as fundamentals and positioning favor the dollar, it has traded at 1.137 after falling to $1.126 earlier.

 Almost half of the members of the U.S. central bank’s policy-setting committee predicted the Fed would raise its benchmark overnight lending rate – the federal funds rate – last month, putting the safe haven currency in an advantageous position.

On the heels of last week’s inflation surprise, U.S. retail sales beat expectations this week. The COVID-19 index is surging once again in Europe, while car sales plunged for a fourth straight month and central bankers insist on holding interest rates low.

As a result of a growing currency crisis in emerging markets, Turkey’s lira has dropped to a record low after the central bank – under political pressure – cut rates despite 20% inflation.

The U.S. Dollar Index, which measures the dollar’s strength against a basket of other currencies, edged up by more than 100 basis points to trade at 95.657

During early Friday, the DXY had recovered from its two-day losses, picking up bids around 95.6.

Greenback buyers were recalled from the greenback gauge after the talk concerning US stimulus and a fresh reading in the inflation gauge printed the previous pullback.

As traders reduce their positions ahead of the weekend, we can expect further easing in the DXY. While there are no major US economic data releases today, traders will be focused on central banks speech.

The ECB’s Christine Lagarde will speak at several events today in Germany. In San Francisco, FOMC member Clarida will address an Asian Economic Policy Conference.

Gold Bugs Set to Take $1,900 Once Again

Bullion bulls once again defied those doubters who believe gold might be about to reclaim $1,900 after two days of losses.

On Wednesday, December gold futures settled almost 1% higher to $1,870 an ounce, the most active contract.

On Tuesday, the yellow metal bounced off of the $1,875 resistance level. The price of bitcoin found support at $1,850 at midnight on Wednesday, ending the subsequent decline. The price has recently bounced between round price levels.

Gold bulls also received some vindication since the start of the week, when they appeared on softer ground.

Gold may appear a bit stretched in the near term, but the path could be relatively straightforward. It is possible that there may be a couple of bumps, but otherwise, it should be mostly straight up if the breakout is real, and there is no reason not to believe this at this time

Bullion has always been considered a hedge against inflation. The bullion market wasn’t able to live up to that billing earlier this year as intense speculation that the Federal Reserve would be forced into a rate hike quicker than expected sent Treasury yields and the dollar up instead, depressing bullion prices.

Following Fed Chair Jay Powell’s assurance earlier this month that any rate hike will only come in the second half of next year, that trend has slightly abated.

Last week, the Labor Department reported that the Consumer Price Index, which measures prices across a wide range of products from groceries to gasoline, rose 6.2% in the year to October.

Mostly due to pump prices of fuel running at seven-year highs, the CPI posted its fastest growth since November 1990.

U.S Dollar Maintains Siege Below 16 Month High

Traders assessed whether the U.S. dollar‘s recent surge could be stalling as it hovered below a 16-month peak in London trade on Thursday, losing ground after falling against the pound and yen overnight.

Following the Fed Chair Powell’s press conference and the October US NFP report, there were indications that market pricing was too aggressive in regards to how quickly the Fed will raise rates once the taper is complete. However, the October US inflation report has completely shifted the narrative of the central bank.

This week’s strong retail sales data contributed to the dollar’s recent rise, which started as a result of expectations the Federal Reserve will increase rates by the middle of next year after a strong inflation report.

As inflation increases and consumers believe that no effective policies exist to reduce the effects of rising prices, consumer sentiment fell in early November to its lowest level in a decade.

Dollar index, which measures the greenback strength against a basket of six rivals, hit 96.226 on Wednesday, the highest level since mid-July 2020.

Fed expectations have turned increasingly hawkish in recent weeks, suggesting limited tailwinds for the U.S. dollar from that factor going forward.

Some, however, saw a drop in the dollar as a buying opportunity. It has been hard to find dips lately, but anything into the low-95s is a good opportunity to buy,

BofA Securities’ monthly survey showed investors expecting around 1.5 rate hikes in 2022 based on the spread between eurozone and U.S. interest rate futures expiring in December 2022.

It could be difficult for the euro to recover much ground versus the dollar by 2022, if the Fed raises rates in the second half

U.S Dollar Rides High On Solid Economic Data

Despite being near a 16-month high, the dollar was up on Wednesday morning in London. Also, investors digested the latest economic data out of the United States and raised their bets that the Federal Reserve will raise rates earlier than expected.

The U.S dollar index tracks the greenback’s performance against other currencies, and rose 0.14% to 96.043 index points. This is the highest level since July 2020.

The U.S Department of Commerce reported on Tuesday that core retail sales grew 1.7% in October compared with the previous month. Overall retail sales were also better than expected at 1.7%.

On Tuesday, St. Louis Fed president James Bullard said that the Fed should prepare for longer-term high inflation by taking a more hawkish stance.

This month, the Fed will reduce its asset purchase program by $15 billion.

In addition, investors believe the Federal Reserve will need to adopt a more aggressive policy response to contain stubbornly high inflation rates. In October, US consumer prices rose at their fastest pace since 1990, according to data released last Wednesday.

A rate hike move by July 2022 appears to have begun to be priced in the markets, and the Fed funds futures indicate that another hike may be coming in November.

Despite ongoing supply chain issues and reopening bottlenecks, U.S. economic growth appears to have shaken off the soft patch caused by the COVID-19 Delta variant.

Markets will remain comfortable pricing in Fed hikes in 2022 after Hawkish comments from Bullard, a stark contrast to Europe where COVID-19 suppression is being implemented again.

Concerns about Europe’s economic recovery from COVID-19 have risen due to increased cases of the virus across the Atlantic. In response to Austria’s lockdown earlier this week, the German parliament will vote on Thursday on stricter measures to curb the outbreak.

Bitcoin Suffers Worst Daily Loss For A Month

In the aftermath of bitcoin’s biggest single-day price drop in nearly four weeks, investors licked their wounds with the soaring dollar, and continuous crackdown by China on crypto mining kept the crypto market tanking lower.

On Tuesday, the flagship crypto posted its worst daily loss in nearly four weeks, putting an end to any hopes of a return to last week’s all-time high near $69k. The bitcoin price was down more than 5% for the day.

Market pundits expect some gravity around $58k following this awaited leverage washout.

In intraday charts, the cryptocurrency appeared to be oversold at $59.5k support.

There appears to be a limited downside for now into London trading hours based on short-term indicators. According to the relative strength index on the four-hour chart, it has been oversold since Oct. 27, right before a 10% price increase.

Despite waning upside momentum, the RSI on the daily chart is neutral. This indicates that intraday buyers are likely to take profits around $63K.

Over the next few days, there may be a period of consolidation before Bitcoin establishes a stronger footing around the $58k level.

Traders have pointed to a potential drop in enthusiasm after last weekend’s Taproot upgrade on the Bitcoin blockchain, the network’s first major upgrade in four years, as one reason for this week’s sell-off.

There’s some speculation that higher inflation might lead the Federal Reserve to tighten monetary policy more rapidly. Investment assets considered to be risky, such as bitcoin and other cryptocurrencies, could be put under downward pressure by such a move.

Despite its popularity as an inflation hedge, Bitcoin could face a massive wave of risk aversion if the Fed increases rates rapidly.