Ethereum price can remain in the range of $1,220-1300 until inflation, FOMC decision

Bitcoin (BTC)

The collapse of FTX sent Bitcoin's price crashing below $15,500, which was the lowest level since November 2020. This sale extended the range of the year-long BTC depreciation to over USD 53,500, which is over 77%.

More and more, however, indicate that all the negative information related to the collapse of the third largest cryptocurrency exchange in the world has already been priced. It is evidenced, among others, by the collapse of entities related to FTX (including BlockFi) did not contribute to a further sell-off of the cryptocurrency market.

Instead, the virtual asset market started to react to macroeconomic events again and returned to a negative correlation with the US dollar. Let us remind you that just after the collapse of the FTX exchange, the correlation between these assets changed from strongly negative (-0.94) to highly positive, reaching the level of 0.84 on November 19, 2022.

In turn, we are seeing a return to negative values, resulting in the dollar's fall driving the rise of Bitcoin. It also made the BTC rate increase from the lows of November 21 2022, by almost USD 2,000.

Over the last few days, we have observed its stabilization in the region of USD 17,000. It may indicate that investors are patiently awaiting Tuesday's publication of another report on consumer inflation in the United States and Wednesday's monetary decision of the Federal Open Market Committee (FOMC).

ETH: It seems highly likely that the exchange rate of this cryptocurrency will remain in this range at least until the publication of the CPI inflation report in the US or even until the announcement of the Fed's monetary decision - 1

Given that the previous CPI report in the US contributed to the BTC increase by 10.5%, we could also expect more volatility, although not as extreme this time.

It is worth recalling that a month ago, economists expected a drop in the CPI by only 0.2 percentage points to 8.0% from 8.2%, while in the end, it fell by as much as 0.5 percentage points to 7.7%, increasing thus expectations for the Fed pivot, i.e. a change in the attitude of the American central bank to further monetary policy tightening, which we wrote about in detail in our report of November 14, 2022.

Inflation is expected to decline by 0.4 percentage points to 7.3%. This means that to cause a similar, positive surprise and lead to a sharp increase in the BTC price, the CPI would have to fall below 7%, which seems unlikely.

Much greater volatility may be caused by the December monetary decision of the Federal Reserve, which will be announced next Wednesday.

It is worth recalling here that Fed chairman Jerome Powell recently pointed out that the incoming economic data are encouraging and indicate that the moment has come when it is reasonable to limit the rate hikes, which may take place from December.

However, given the probability that after four increases by 75 basis points in a row, the Fed will decide to raise the federal funds rate by only 50 basis points at its December meeting, it is highly probable that investors will attach more importance to the hike itself to any hints on how far the Fed can raise interest rates.

If only Chairman Powell confirms the plan of increases by only 50 basis points in the first quarter of 2023, capital could again start to move towards risky markets, i.e. stocks and cryptocurrencies, which would mean that the BTC low is over.

While the Fed's monetary decisions were one of the main catalysts driving the cryptocurrency winter observed for over a year, future meetings could already contribute to a certain upward rebound and the beginning of a new bull market.

The risk for this scenario is a more hawkish stance of the Federal Reserve and the announcement of a much longer tightening cycle; as a result, the federal funds rate would be raised not to 5% but to 5.25%, or 5.50%.

Another factor that cannot be underestimated is the global economy's health. Suppose it turns out that Europe will plunge into a deep recession next year, and the United States experiences only a temporary slowdown. In that case, capital could move from risky markets (stocks and cryptocurrencies) to safe havens (US dollar and bonds). ).

This also means that even if Wednesday's monetary decision by the Fed contributes to an upward rebound in the cryptocurrency market, it is unlikely that it will start another crazy bull market, like the one in the second half of 2017 or the second half of 2020 and early 2021.

Likely, the rebound will initially be relatively calm. We will have to wait for greater growth dynamics until the middle of next year, when the global economy will deal with the most severe part of the crisis. Financial markets will begin to price in monetary policy easing in advance, that is, interest rate cuts by the Fed, which could happen at the end of next year or at the beginning of 2024.

Ethereum (ETH)

Ethereum's quotations fell by more than 36% between November 4 and 9, and then, driven by a highly optimistic report on CPI inflation in the US, they rebounded by almost 26%, thus leading to a re-test of previously defeated support (now resistance).

However, this increase lasted only one day, and then from November 11, 2022, the ETH rate fell again, returning to the USD 1,100 region, where a demand reaction appeared again on November 22, 2022.

The increases observed since then have brought the exchange rate of this cryptocurrency back to the technical resistance at USD 1,300, where some supply pressure has reappeared in recent days.

Since then, ETH has been in a horizontal trend between $1,220 support and $1,300 resistance.

It seems highly likely that the exchange rate of this cryptocurrency will remain in this range at least until the publication of the CPI inflation report in the US or even until the announcement of the Fed's monetary decision.

A sustained break from this consolidation upside would drive a further rally north towards the $1380-1425 zone or even $1650.

Litecoin (LTC)

Litecoin fell by between November 7 and November 9, 2022, by over 35%. This sell-off stopped only in technical support, around USD 50, where on November 10, 2022, quite an apparent demand pressure appeared.

However, due to the subsequent appreciation, the LTC rate increased by over 78%, more than making up for the previous losses. It is worth noting that this increase led to overcoming the technical resistance levels of USD 64.50 and USD 73 and stopped several days ago, forming a consolidation between USD 73 and USD 81.

If the market breaks out of this system, we could expect a further increase in the LTC rate towards USD 96.