Market Analysis Dec 18th, 2023: BTC Sustains Bullish Trend, Stabilizing at $42.6k

Update 18 Dec 2023 • Reading Time 7 Minute

Reading Time: 7 minutes

Bitcoin (BTC) continues its bullish momentum, experiencing a 1.5% increase in trading volume. The Fear and Greed Index, reflecting an increasing level of greed, suggests a growing inclination among investors to acquire more crypto. Read the full analysis below.

As usual, the Pintu trading team has gathered critical information and analyzed the general economic situation and the crypto market’s movements over the past week. However, it should be noted that all information in this Market Analysis is intended for educational purposes, not as financial advice.

Market Analysis Summary

🏦 The Federal Reserve has decided to maintain the benchmark interest rate at 5.25%-5.50%, noting a slight decrease in inflation over the past year.
📉 The unemployment rate has decreased from 3.9% to 3.7%, indicating optimism that the U.S. economy will achieve a “soft landing,” where inflation normalizes without causing a recession.
📈 The Michigan Consumer Sentiment Index saw a 13.2% increase to 69.4%, exceeding expectations and offsetting declines from the last four months.
💪🏻 BTC remains in bullish momentum, hovering around the $42.6k price range.
✍🏻 There is potential for ETH to reach $3,000 in the next phase, with ETH’s latest support at the $2,070 price level.

Macroeconomic Analysis

Fed Interest Rate Decision

At last week’s Federal Reserve meeting, the U.S. central bank decided to keep the federal funds rate at 5.25%-5.50%, noting a slight decline in inflation over the past year. However, 17 out of 19 Fed officials forecast a cut in the federal funds rate by the end of 2024, with the median projection suggesting a reduction of three-quarters of a percentage point.

This shift in policy outlook comes amid reduced expectations for a rate cut in March, influenced by recent strong economic data, including a robust U.S. employment report and a higher-than-expected 4.0% year-over-year core consumer price index (CPI).

Fed Chairman Jerome Powell indicated that the central bank may be nearing the end of its series of rate hikes, in line with the “dot plot” of Fed officials’ rate projections.

Other Economic Indicators

Unemployment rate and nonfarm payrolls: The U.S. economy added 199,000 jobs in November, beating economists’ expectations of 180,000 and demonstrating strong job growth despite the Federal Reserve’s aggressive measures to control inflation. This, along with a drop in the unemployment rate from 3.9% to 3.7%, suggests optimism that the U.S. economy will achieve a “soft landing” where inflation normalizes without leading to a recession. However, job growth has slowed from earlier in the year. Federal Reserve Chairman Jerome Powell reaffirmed the commitment to tight monetary policy to bring inflation down to the 2% target on a sustained basis and hinted at possible rate cuts in the future if inflation approaches this target.
Michigan Consumer Sentiment Index: The Michigan Consumer Sentiment Index rose 13.2% to 69.4% in December, beating expectations and reversing declines in the previous four months. This increase puts sentiment 39% above its all-time low in June 2022, but still below pre-pandemic levels. All components of the index improved, with significant increases in both the short- and long-term outlook for business conditions across demographic groups. Some 14% of consumers expressed optimism, influenced by expectations for favorable economic outcomes from next year’s election. Meanwhile, year-ahead inflation expectations fell to 3.1%, the lowest level since March 2021, and long-term inflation expectations fell to 2.8%, both still above pre-pandemic levels but indicating a trend toward easing inflation concerns.
Consumer Price Index (CPI): Inflation slowed in November as the headline and core Consumer Price Index (CPI) readings aligned with expectations. According to the Bureau of Labor Statistics, the headline CPI fell to 3.1% year-on-year, while the core CPI was unchanged at 4.0%. On a month-over-month basis, the headline and core CPI increased slightly by 0.1% and 0.3%, respectively. November’s core CPI marks the eighth consecutive month of deceleration and represents the lowest 12-month change since August 2021.
Producer Price Index (PPI): U.S. wholesale prices were unchanged in November, a sign that inflation is moderating. The stability in the wholesale price index, due in part to a decline in gasoline prices and limited movement in other major categories, defied economists’ expectations for a 0.1% increase and is consistent with recent consumer price reports of moderating inflation. These indicators of slowing price increases are likely to influence the Federal Reserve’s decision to maintain its current interest rate stance at its last major meeting of the year, where rates are widely expected to remain unchanged.
Retail Sales: U.S. retail sales unexpectedly rose 0.3% in November, reversing October’s 0.2% decline. The increase indicates a strong start to the holiday season and is consistent with signs of moderating inflation. Excluding autos, sales rose 0.2%, and excluding fuel, sales rose 0.6%. This sales growth suggests that consumers are adjusting to the pace of price increases, as evidenced by the 0.1% increase in the Consumer Price Index (CPI) for the same month. On a year-over-year basis, sales were up 4.1%, outpacing the 3.1% headline CPI rate and demonstrating economic resilience despite inflation rates above the Federal Reserve’s 2% target.
Initial Unemployment Claims: Weekly data released by the U.S. Department of Labor on Thursday showed that there were 202,000 initial claims for unemployment benefits for the week ending December 9. This number is an increase from the previous week’s revised figure of 221,000 and exceeded expectations of 220,000. In addition, continuing claims increased by 20,000 to 1.876 million for the week ending December 2nd.

BTC & ETH Price Analysis

BTC

Today, there is a modest bearish sentiment in the markets, with the global market cap slightly dipping by 0.09% from its previous 24-hour level, resting at $1.6 trillion at the time of this update. Alts are over-performing BTC.

The fear and greed index registers at 77, signaling a prevailing sense of greed. The global trading volume has increased by 6.5% over the past 24 hours, reaching $68.8 billion as of the latest update.

BTC is currently experiencing bullish momentum, with its price standing at $42.6K as of the latest update. This represents a daily decrease of 0.52% and a weekly drop of 1.3%. In response to the price movement, the token’s trade volume has surged by 1.5% during the same period, reaching $25.3 billion. The Bollinger bands exhibit significant separation, indicating high volatility levels in the BTC price.

ETH

ETH has dropped 5% over the week, the trade volume has surged by 16% during the same period, reaching $13 billion. Should buyers maintain their aggressive stance, there’s potential for ETH to reach $3,000 in the subsequent phase. Moving forward, the momentum is looking strong, and ETH is indicating signs that it could regain some of the ground it lost to Bitcoin in the preceding weeks. The Bollinger bands display significant separation, indicating elevated volatility levels in the ETH price. Support at $2,070.

On-Chain Analysis

📊 Exchange: As the exchange reserve continues to rise, it indicates higher selling pressure. Net deposits on exchanges are low compared to the 7-day average. Lower deposits can be interpreted as lower selling pressure.
💻 Miners: Miners’ are selling holdings in a moderate range compared to its one-year average. Miner’s revenue is in a moderate range, compared to its one-year average.
🔗 On-Chain: More investors are selling at a profit. In the middle of a bull market, it can indicate a market top. Long-term holders’ movement in the last 7 days was higher than the average. If they were moved for the purpose of selling, it may have a negative impact. Investors are in an anxiety phase where they are currently in a state of moderate unrealized profits.
🏦 Derivatives: Long-position traders are dominant and are willing to pay short traders. Buying sentiment is dominant in the derivatives market. Takers fill more buy orders. As OI decreases, it indicates investors are closing futures positions and the possibility of trend reversals. In turn, this might trigger the possibility of a long/short squeeze caused by sudden price movement or vice versa.
🔀 Technicals: RSI indicates an overbought condition where 70% of price movement in the last 2 weeks has been up and a trend reversal can occur. It indicates a neutral condition where the current price is in a moderate location between the highest-lowest range of the last 2 weeks.

News About Altcoins

Arbitrum Experiences Temporary Disruption Due to Surge in Bitcoin Ordinals-Inspired Inscriptions. Arbitrum, a layer 2 blockchain on Ethereum, experienced a temporary outage lasting about an hour and a half after a surge in inscriptions inspired by bitcoin ordinals caused its sequencer to stop working. According to Hildobby, a data researcher at Dragonfly, 90% of transactions on Arbitrum were inscriptions before the chain stopped. The disruption occurred after an inscription called “fair” triggered the halt. Arbitrum announced in a status update on Friday evening that gas prices on the network had stabilized and operations had returned to normal, with plans to provide a full post-mortem analysis in the coming days. Harry Kalodner, co-founder and CTO of Offchain Labs acknowledged the challenging day and emphasized the importance of learning lessons and making improvements to ensure Arbitrum meets high-performance expectations. Similar incidents involving tokens like Ordinals have also caused problems on the Telegram Open Network (TON) and Polygon blockchains.

News from the Crypto World in the Past Week

MetaMask, a leading software cryptocurrency wallet, announces global expansion with new partnerships in six countries. Through partnerships with VietQR and Mobile Money in Vietnam, GCash in the Philippines, QRIS in Indonesia, Thai QR in Thailand, Vodafone Cash in Egypt, and Webpay in Chile, MetaMask offers localized options to its users. In addition, MetaMask has extended its reach to Vietnam, Malaysia, Japan, and South Korea, supporting local money transfers through strategic alliances with Unlimit and TransFi.
Ledger Swiftly Addresses Hacking Incidents and Enhances Security. Ledger CEO Pascal Gauthier described the December 14 hack as an isolated incident. The hack, which targeted Ledger’s Javascript connector library, lasted less than two hours and was stopped within 40 minutes of discovery. The hack affected third-party decentralized applications (DApps), but did not affect Ledger hardware or the Ledger Live platform. Gauthier explained that the hack resulted from a phishing scam perpetrated by a former employee. The estimated loss from the hack is approximately $504,000. This incident can potentially affect Ethereum Virtual Machine users interacting with the affected DApps.