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Crypto Market Forecast: Week of December 13th 2021

A curated weekly summary of forward-focused crypto news that matters. This week, a volatile crypto market ponders how a Fed taper may affect its value, inflation in the USA hits a 40-year high, and Ethereum co-founder says Ethereum's high gas fees are a sign of a healthy network.

Bitcoin (BTC) and the crypto markets have had another volatile week as we finish what has been a rollercoaster year. Bitcoin began 2021 trading near US$29,000, eventually peaking at US$69,000 in November, a new all-time-high. Since then the price of the asset has dropped to around US$50,000, a key psychological price level that analysts say needs to be defended to prevent traders from exiting the markets further.

Bitcoin currently trades for US$50,500, up ~3% in the last week but down ~21% in the last month. Ethereum (ETH), and Binance-coin (BNB), the 2nd and 3rd largest assets in crypto, are down ~1%, and up ~3% in the last week.

On Friday, inflation data released in the United States showed that the rise in prices of consumer goods between November 2020-November 2021 was 6.8%, the highest jump since May 1982. U.S. dollar holders continue to see their purchasing power diminish with November’s data even higher than October’s 6.2%. The Federal Reserve, the U.S. central bank, continues to grapple with the effects of its aggressive monetary stimulus package during the pandemic period.

Initially, after the inflation data was announced, crypto markets slipped. The markets saw the higher inflation data as a signal that the Fed was likely to reduce its monetary stimulus and begin the process of tapering. Last month, the Fed announced that tapering, the gradual weaning of the Fed’s purchases of Treasury bonds and government-guaranteed mortgage-backed securities, would begin. The Fed has been printing money to enable these purchases to support markets impacted by pandemic-induced economic restrictions.

Bitcoin and the rest of the crypto market have performed strongly during the period of US dollar inflation. Wall Street Veterans like Paul Tudor Jones endorsed BTC as a store of wealth and a shield against dollar inflation. Some of Bitcoin’s biggest institutional bulls such as Michael Saylor have stated that they initially invested in the asset because of its anti-inflationary characteristics.

If the Fed sticks to its plan of tapering, inflation will slow in the US and its economy will cool off. This is likely to reduce some of BTC’s short-term appeal and lead to some consolidation after the extended bull run it has had in 2021. The asset is up ~73% year-to-date but since the initiation of tapering was announced, investors have begun pulling out profits and taking a risk-off view towards the crypto markets.

Crypto markets, as a whole, remain driven by the sentiment and market movements of Bitcoin. A bearish macro view on BTC will negatively affect the value of the wider crypto market.

Bitcoin, the rest of the digital asset market, and traditional markets had a strong weekend, however, after it became clear that the inflation spike was in line with expectations, the market cooled. Many market observers believe that inflation has now peaked and will naturally pull back, decreasing the likelihood of an aggressive Fed taper.

Trading set-ups for the week

Pro trader Josh Olszewicz explores trading options and signals for BTC and ETH – and lays out the trading setups he’s watching for the upcoming week. Start your week off right with Josh’s thoughts on trading strategies on a weekly basis.

Bitcoin, ALTs and Ethereum – Trading setup for the week of the 13th of December 2021

Crypto news for the week ahead

12th December- BitTorrent Token redenomination event

BitTorrent Token (BTT) is set to begin this week with a redenomination event that will see tokens be split at a 1-to-1000 ratio. This will mean that while the market cap of the token will remain the same, the total supply of BTT will rise by 1000x. This restructuring will make each individual BTT cheaper (but won’t reduce current holders wealth), this should make BTT more appealing to newcomers and may allow the ecosystem to expand. BTT is up ~29% in the last week in anticipation of the split.

13th December- FTX will list BENQI (QI)

Popular international exchange, FTX, is set to launch markets for the QI token this Monday. Users can now begin depositing QI tokens into their FTX account with a QI/USD market set to open at 13/12/2021 14:00 (UTC). BENQI is a decentralized, non-custodial liquidity market protocol on the Avalanche platform. It offers depositors significant returns through yield farming programs.

Top 10 Crypto Summary

Marcap 1312-min

It was a mixed week of trading in the digital asset markets as big winners in 2021 like SOL, LUNA, and ETH traded red, while assets like XRP and ADA took their chance to post some gains. Much has been made of the rising cost of transacting on the Ethereum blockchain with many like Three Arrows Capital CEO Su Zhu describing the network as unusable for most users.

The network’s co-founder Joseph Lubin, however, described the rising gas cost as “a measure of success,” that could not be avoided. Lubin said at a conference “When a new technology becomes successful, it always has scaling issues.” Lubin expects Ethereum to overcome its issues and continue to grow.

Bitcoin Price Chart

BLX 1312-min

While the price of BTC has been volatile in recent weeks because of uncertainty surrounding US policy and dollar inflation, the fundamentals of the network continue to look strong. Data provider Glassnode reported last week that hashrate sits just below its all-time-highs (7-day moving average). Since the Chinese ban on Bitcoin mining in May tanked hashrate, it has recovered far more quickly than most expected. An endorsement of the anti-fragility of the network.


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