14.12.202110:10 Forex Analysis & Reviews: Fed meeting's impact on bitcoin and ethereum

Bitcoin continues its decline, along with a number of other altcoins and tokens. Buyers of the world's first cryptocurrency face a very important challenge to protect support at 46,900. Ether has fallen below the key support of 3,912, which poses a big challenge.

Digital inflation protector

Bitcoin's fall could be directly related to the approaching Federal Reserve meeting, as cryptocurrencies have benefited quite a bit from higher inflation, which is now rising at a rapid pace in all developed countries. It is hard to say what will happen if the US central bank accelerates tapering of support measures, as well as announces a tightening of monetary policy and an earlier interest rate hike next year.

Obviously, this will have an impact on interest in bitcoin, which is now a digital inflation protector. However, to say that the world's first cryptocurrency will fall, as it did 2-3 years ago, would certainly be wrong. There will probably be quite a few big players who will take advantage of the falling market and who are waiting for more attractive prices after the bullish rally seen this year.

The number of active bitcoin addresses touched 1 million after the crash, according to a report from Arcane Research, its highest since the cryptocurrency plunged 35% in May. A notable dip buyer was Michael Saylor-led MicroStrategy Inc, which added 1,434 bitcoins to its holdings for about $82.4 million, the company said last week. However, the number of bitcoin wallets holding more than 1,000 tokens fell during the week, potentially indicating profit-taking among larger players.

Cryptocurrencies topped the list of assets expected to experience a correction in 2022, as per a survey of 500 global institutional investors conducted by Natixis Investment Managers. A serious correction could start when the Federal Reserve begins to raise interest rates, making bonds a more attractive investment vehicle than they are now. This will cause profit taking on risky assets to reallocate funds to safer ones.

However, Visa survey showed 40% of global crypto owners would likely or very likely switch their primary bank to one that offers crypto-related products in the next 12 months. The Natixis survey also showed that only 4 in 10 institutions considered crypto a legitimate investment option although, of the 28% already investing in crypto, 90% expect to maintain or increase their allocation in 2022.

German banks plan to merge

German savings banks, the country's largest financial group with more than €1 trillion in assets, are planning to create a digital wallet to store and trade cryptocurrencies. In 2022, the banks also plan to give customers access to trade directly from their accounts.

The network of some 400 savings banks across Germany will vote on whether to proceed with the project early next year, German business publication Capital reported. If approved, the banks would be able to offer trading of digital currencies such as bitcoin and ether to their customers direct from their checking accounts. The savings banks have about 50 million customers and manage about $1 trillion in assets. Even modest take-up could see sizable inflows of funds into the crypto market.

Notably, in July a law allowing "Spezialfonds" (special funds) to allocate up to 20% of their portfolios to crypto, which could equate to $400 billion, was approved.

Bitcoin technical picture

The trade remains sideways. I recommend trading in it. Buyers' main goal now is to climb to the level of $51,660 and to break it, which will provide a good recovery to the area of $55,730. The $59,400 level is not far off there. That would end the cryptocurrency's decline on December 3. The pressure on BTC will return once it breaks above $46,900, which would open the way to $42,300. However, active buying around $46,900 and holding it will attract new investors to the market is a bullish signal for bitcoin.

Ethereum technical picture

The bulls lost the battle for the $4,140 level, after which the ether slumped and tested the nearest support at $3,912, which was also broken yesterday. Only a return above this level will return demand for ETH. The bulls' key challenge will also be to protect $3,680, as a breakout of this level as well is a very bad call for buyers later this year. If demand for Ethereum resumes, bears will protect $4,140 resistance, from which a major drop took place yesterday. A break of $3,680 would open the way to $3,448, the level that saved the market during the December 3 sell-off.