Although stocks have underperformed in the wake of FTX, crypto holds a remarkable correlation during times of overall volatility.
This week’s CPI reading was no exception – stocks initially rallied thanks to CPI numbers showing US inflation fell faster than expected.
The next day saw the FOMC meeting conclude with a 50 basis point interest rate hike – less than the previous and widely expected meetings.
Despite this, the subsequent speech by Federal Reserve Chairman Jerome Powell did not deliver the outcome the bulls wanted. The initial CPI noise faded, and on December 15th, stocks began to drop significantly, taking cryptocurrencies with them.
At the time of writing, the Dow Jones, S&P 500, and Nasdaq Composite are down 2%, 2.2%, and 2.6%, respectively.
The BTC/USD pair is back below $17,500, after hitting a one-month high around $18,400 the day before. Data from Cointelegraph Markets Pro and TradingView showed that the ETH/USD pair fell more than 5% in 24 hours.
BTC/USD 1-hour candlestick chart (Bitstamp). Source: TradingView
With stocks continuing a macro correction, Mike McGlone, chief commodity strategist at Bloomberg Intelligence, had an alarming move.
“Some 1929-like forces are at work in 2022 – the 2021 pump in US liquidity can be compared to the stock market bubble of 1929, with similar consequences,” he warned.
The US dollar has rebounded from its lowest levels in six months
At the same time as stocks and cryptocurrencies stepped down, the US dollar took the opportunity to make up for the losses.
After hitting its lowest levels since June this week, the US Dollar Index (DXY) is busy trying to put it on a multi-month floor.
DXY is currently retargeting 105, after falling below 103.5 on FOMC day.
US Dollar Index (DXY) chart in the form of a one-day candle. Source: TradingView
“The dollar is bouncing back hard right now at support. Nobody wants to see this. Except maybe Jerome Powell, because he hates us all,” analyst, trader and podcast host Scott Melker wrote in a tongue-in-cheek response.
Looking ahead to 2023, popular Twitter analytics account DJ meanwhile said that the end result could be DXY’s “tear up” post-consolidation.
“DXY plays as expected,” he commented on the weekly chart.
It seems that the first wave down (probability of a out of 4) has completed here. We could be in a fairly long sideways consolidation situation through most of 2023, like 2015, before eventually moving higher to complete the count.”
Annotated chart of the US Dollar Index (DXY). Source: DJ / Twitter
The main trend line for DXY comes in the form of the 200-day moving average, which recently lost ground for the first time since mid-2021.
Ongoing Binance Fields FTX “FUD”
Waiting in the wings to shake up the crypto market sentiment specifically, meanwhile, is the ongoing saga involving the now-defunct FTX exchange.
Related: Bitcoin Market Drop 70% Kills Bitcoin ‘Tourists’ As Screams Buy Metric
As Cointelegraph continues to report, the world’s largest exchange Binance is now in the firing line as accusations of illiquidity and shady maneuvers abound.
CEO Changpeng Zhao, better known as CZ, has repeatedly sought to control the market and has rejected what he calls a “FUD” around Binance.
However, traders have already voted with their feet, withdrawing billions of dollars from cryptocurrency over the past week.
Thus any negative news could easily exacerbate the cold feet of the markets.
“People can withdraw 100% of the assets they hold on Binance; we won’t have a problem on any given day,” Zhao told CNBC in an interview on Dec. 15.
