Daily News 19

Tag: Interest rate hikes

  • Bitcoin Bottom Signal vs. Fed Rate Expectations: Which Drives Market Direction? Two Analysts Weigh In

    Bitcoin Bottom Signal vs. Fed Rate Expectations: Which Drives Market Direction? Two Analysts Weigh In

    Key Highlights

    • On-chain analyst Willy Woo identifies a Fisher Transform golden cross on Bitcoin’s monthly chart, marking only the fourth such bottom signal in the asset’s history.
    • Crypto analyst Murphy contends that interest rate hikes by the Federal Reserve and Bank of Japan are not inherently bearish for Bitcoin, emphasizing pace of tightening and market structure over rate decisions alone.
    • Historical comparison shows Bitcoin rallied during the 2015–2017 and 2023 rate hike cycles, while the 2022 decline coincided with aggressive 75-basis-point increases; current conditions mirror early 2023 more than 2022.

    Willy Woo’s Fisher Transform Analysis Signals Potential Bitcoin Bottom

    As Bitcoin consolidates between $76,000 and $79,000, prominent on-chain analyst Willy Woo has turned attention to the asset’s monthly chart, where the Fisher Transform indicator has formed a golden cross. First published in 2002, the Fisher Transform is designed to identify turning points in price movements. According to Woo, this latest crossover represents only the fourth bottom signal in Bitcoin’s entire history. Crucially, the previous three occurrences did not result in false breakouts, lending historical weight to the current formation.

    Why the Golden Cross Isn’t an Immediate Buy Signal

    Despite the indicator’s track record, Woo cautions against interpreting the golden cross as a sudden trend reversal or a direct buy signal. He notes that Bitcoin’s price may continue moving sideways for a period before resuming its upward trajectory. Woo also points out that during bull markets, the Fisher Transform has occasionally crossed bearish only to turn bullish again without signaling the end of the primary trend. Therefore, while the current signal points to a possible bottom, it does not, by itself, definitively confirm a trend reversal.

    Murphy Challenges Rate Hike Bearish Narrative with Historical Evidence

    Separately, crypto analyst Murphy argued that interest rate hikes by the U.S. and Japanese central banks alone do not indicate Bitcoin will re-enter a bear market. Murphy asserts that the pace of monetary tightening, market structure, and investor positioning will be more decisive than the rate hike decisions themselves in determining Bitcoin’s direction.

    To support this view, Murphy compared three distinct tightening cycles. In 2022, the Federal Reserve implemented a cumulative 425 basis points of increases, including four consecutive 75-basis-point hikes from June to November. During that period, Bitcoin declined from approximately $41,000 to $15,800. In contrast, during 2023, the Fed raised rates four times by 25 basis points each, and Bitcoin rose from roughly $16,500 to $42,000. Murphy also highlighted the December 2015 to December 2017 cycle, when the Fed hiked five times by 25 basis points each, and Bitcoin surged from about $454 to $16,515.

    Market Structure Resembles Early 2023 More Than 2022 Peak

    Murphy further observed that the current structure of the Bitcoin market more closely resembles conditions at the beginning of 2023 than those during the initial 2022 rate hike period. At that time, inflation was falling, the size of each rate hike decreased from 75 to 25 basis points, and the market priced in the end of the tightening cycle. According to the analyst, if future rate hikes remain limited to around 25 basis points and the market does not anticipate a new, prolonged tightening cycle, interest rate policy alone may not be sufficient to trigger a fresh bear market in Bitcoin. The pace and scale of future Federal Reserve rate hikes will be critical for Bitcoin’s trajectory.

    Why This Matters

    The convergence of technical and macroeconomic analyses offers a nuanced view for market participants. Woo’s Fisher Transform signal provides a rare, historically validated technical marker suggesting a cyclical bottom may be in place, yet his emphasis on the indicator’s limitations—specifically its inability to time entries or guarantee immediate reversals—underscores the need for patience. Meanwhile, Murphy’s macroeconomic framework challenges the simplistic narrative that higher rates automatically depress risk assets like Bitcoin. By demonstrating that the asset has rallied during previous tightening cycles when hikes were measured and expected, the analysis shifts focus to the trajectory of policy rather than its mere existence. With inflation moderating and central banks signaling smaller incremental moves, the current environment bears stronger resemblance to the constructive 2023 backdrop than the disruptive 2022 shock. For investors, the key takeaway is that Bitcoin’s next major directional move will likely hinge on whether the Fed maintains a gradual, telegraphed path or surprises with accelerated tightening.

    Frequently Asked Questions

    What is the Fisher Transform golden cross, and why is Willy Woo highlighting it now?
    The Fisher Transform is a technical indicator published in 2002 designed to identify price turning points. A golden cross occurs when its faster line crosses above its slower line. Willy Woo highlights that this has happened only four times in Bitcoin’s history on the monthly chart, with the prior three instances marking valid bottoms without false breakouts.
    Does the Fisher Transform golden cross mean Bitcoin will rally immediately?
    No. Woo explicitly states the signal is not a sudden trend reversal or a direct buy signal. He notes Bitcoin may trade sideways for a while before continuing its uptrend, and that the indicator has previously flipped bearish then bullish again during bull markets without ending the primary trend.
    Are Federal Reserve interest rate hikes bearish for Bitcoin?
    Not necessarily. Analyst Murphy shows that Bitcoin fell during 2022’s aggressive 75-basis-point hikes but rose during the 2015–2017 and 2023 cycles when hikes were smaller (25 basis points) and well-telegraphed. The pace, scale, and market expectations around rate hikes matter more than the hikes themselves.
  • Bloomberg’s Mike McGlone Warns on Bitcoin, Reveals Condition to Save BTC

    Bloomberg’s Mike McGlone Warns on Bitcoin, Reveals Condition to Save BTC

    Bloomberg Intelligence senior commodities strategist Mike McGlone has warned that elevated equity valuations and expectations of further Federal Reserve interest rate hikes are generating strong sell signals for Bitcoin.

    Bitcoin’s Risk-Adjusted Returns Under Scrutiny

    McGlone noted that Bitcoin’s performance over the past five years has roughly matched the S&P 500 index, but with approximately three times higher volatility. He described Bitcoin as an extremely volatile and speculative digital asset that exhibits a high correlation with the stock market while competing with millions of other crypto assets.

    From a risk and portfolio management perspective, McGlone argued that Bitcoin presents a negative picture because it offers similar returns to the S&P 500 while carrying approximately three times the volatility.

    Three Key Downside Risk Factors Identified

    The analyst pointed to three factors increasing downside risks for Bitcoin:

    • Bitcoin encountering resistance around $80,000 during its recent rise
    • Futures markets pricing in approximately 70 basis points of Fed interest rate hikes over the next year
    • The S&P 500 index trading at significantly higher levels compared to its 200-week moving average

    McGlone noted that Bitcoin tends to move strongly with the S&P 500, especially during periods of decreased market risk appetite, and therefore considers BTC a high-beta asset that follows the stock market.

    Bearish Scenario: Potential Drop to $10,000

    McGlone raised a sharp long-term bearish scenario in which Bitcoin could move toward the $10,000 level, a zone that has acted as critical support multiple times in the past. A sustained decline of approximately 20% in the S&P 500 could trigger such a scenario, according to the analyst.

    However, McGlone added that for this negative scenario to be invalidated, Bitcoin needs to decouple from the stock market and consistently demonstrate strong performance. He suggested that BTC’s ability to maintain strength, particularly during a potential S&P 500 decline, could support the thesis that Bitcoin is no longer just a high-beta risk asset.

    This is not investment advice.

  • Renowned Economist Harshly Criticizes the Fed’s Latest Policies: “They’re on the Wrong Track”

    Renowned Economist Harshly Criticizes the Fed’s Latest Policies: “They’re on the Wrong Track”

    Economist James E. Thorne has criticized the Federal Reserve’s restrictive monetary policy, arguing that higher interest rates may not address the underlying causes of current inflationary pressures.

    Thorne said Fed Chairman Kevin Warsh and Wall Street circles appear to view supply-driven inflation as a conventional overheating problem caused by excessive demand. However, he argued that elevated inflation is not solely the result of strong consumer spending. Energy costs, housing shortages, production cuts, and other supply constraints are also contributing to price pressures.

    He warned that additional rate increases could weaken the economy’s productive capacity rather than reduce inflation.

    Employment Data Challenges the “Overheating” Thesis

    Thorne pointed to declining quarterly full-time employment data as evidence that the economy may be undergoing a structural transformation rather than experiencing a temporary, one-month statistical anomaly. He said the fact that a significant share of the decline came from public-sector employment did not reduce its importance.

    In Thorne’s view, the data suggests that the economy is not necessarily overheating. Instead, the labor market may be adjusting to changes in fiscal policy, industrial structure, and institutional conditions.

    He said the housing market was sending a similar signal. As one of the sectors most sensitive to interest rates, housing is directly feeling the effects of tight monetary policy, Thorne argued, rather than driving inflation.

    Thorne also said recent US economic growth could be attributed less to broad, credit-fueled overheating and more to the early effects of the Trump administration’s supply-side economic policies, along with a long-term investment cycle.

    He highlighted rising investment in artificial intelligence, data centers and computing capacity, electricity generation, and infrastructure. These investments, he said, could expand the economy’s production capacity and improve efficiency.

    According to Thorne, further Federal Reserve rate increases could make it harder to finance productive investment, ultimately limiting the expansion of future supply capacity while doing little to resolve supply-related inflation.

    “Customs Duties Are Not the Same Thing as Persistent Inflation”

    Thorne further argued that, under classical economic theory, the effects of genuine supply shocks should diminish over time as prices and production adjust.

    He noted that an oil-price shock does not necessarily require permanently high interest rates. Tariffs can also produce a one-time increase in the price level, he said, but that is different from a self-reinforcing and continuous inflationary process.

    Thorne also said there is no strong evidence that the neutral real interest rate, a measure considered important for economic stability, or “r*” has increased by approximately 100 basis points over a short period.

    For the Federal Reserve, he said, the central question is whether further monetary tightening is appropriate while full-time employment is declining and the housing sector remains under pressure.

    Thorne concluded that, under current conditions, new rate increases could represent less of “prudent inflation control” and more of a deliberate suppression of demand caused by supply constraints and the mistaken belief that an economy undergoing structural change is overheating.

    This is not investment advice.

  • Bitcoin and Gold Plunge as Kevin Warsh Signals Tighter Federal Reserve Policy

    Bitcoin and Gold Plunge as Kevin Warsh Signals Tighter Federal Reserve Policy

    Investors turned cautious on August 28 as the U.S. dollar strengthened and markets assessed more hawkish comments from Federal Reserve Chair Kevin Warsh during his first speech as Fed chair at Jackson Hole, Wyoming.

    Bitcoin dropped below $79,000, while gold and silver also suffered steep losses. The sell-off reportedly erased approximately $670 billion in market value in just seven minutes.

    The common factor was a stronger dollar and rising expectations that the Federal Reserve may need to keep interest rates high to bring inflation under control.

    Warsh Signals That Further Tightening Remains Possible

    Warsh suggested that the Fed’s fight against inflation may not be over, saying that financial conditions don’t seem restrictive enough right now. Although he did not promise an immediate rate hike, the Fed chair made clear that additional monetary tightening remains on the table.

    That outlook is changing investor positioning, particularly for assets that tend to perform well when money is inexpensive and interest rates are low.

    What the Sell-Off Means for Bitcoin and Gold

    Warsh’s remarks and the broader market sell-off have added uncertainty for investors. The key question is whether Bitcoin’s and gold’s recent gains reflected genuine, long-term market shifts or were driven largely by expectations that monetary policy would become increasingly supportive.

    Investors are now watching the dollar, Treasury yields and interest-rate expectations for further signals. A stronger dollar could make conditions more difficult for both Bitcoin and gold by reducing their appeal.

    If the dollar continues to rise and yields remain elevated, Bitcoin may face further pressure. However, if markets interpret Warsh’s comments as a warning rather than a signal of aggressive rate hikes, the latest decline could prove to be another sharp market swing rather than the start of a prolonged downturn.

    Warsh’s speech was not the only factor behind the decline. Markets were already highly sensitive, with investors preparing for a significant signal on the future direction of monetary policy.

    For now, Bitcoin’s decline and gold’s underperformance suggest that investor sentiment has shifted away from hedging against currency devaluation and toward assessing how many additional interest-rate hikes markets may still need to price in.

    Source: cryptonews.net