First Mover Asia: Interest Rate Hikes in the Future? Crypto Rally Shorts Out

Good morning. Here’s what’s happening:

Market moves: Bitcoin gave up early gains after Powell’s hawkish comments.

Technician's take: Long-term momentum remains weak and BTC is at a critical point.

Catch the latest episodes of CoinDesk TV for insightful interviews with crypto industry leaders and analysis.

Bitcoin (BTC): $36,826 -0.3%

Ether (ETH): $2,470 +0.7%

Top Gainers

Top Losers

S&P 500: 4,349 -0.1%

DJIA: 34,168 -0.3%

Nasdaq: 13,542 +.02%

Gold: $1,816 -1.7%

A relief rally in crypto that had bitcoin trading near $39,000 was short-lived as the largest cryptocurrency by market capitalization fell back below $37,000 after the U.S. Federal Reserve released a statement Wednesday about reducing the size of its balance sheet.

At the time of publication, bitcoin was changing hands at about $36,800, down slightly over the past 24 hours, according to CoinDesk data. Ether, the second biggest cryptocurrency by market capitalization, was trading over $2,450 and was up slightly during the same time period.

Data compiled by CoinDesk shows that bitcoin’s spot trading volume across major crypto exchanges rose on Wednesday compared with a day ago.

Bitcoin briefly rose to nearly $39,000 right after the U.S. central bank released its statement, as the market believed the news was already “priced in.”

Following the stock market, bitcoin gave up the earlier gains as investors and traders weighed Fed Chairman Jerome Powell's comments.

Powell said that he won't rule out an interest rate hike at a future meeting and signaled that the central bank would steadily remove support for the economy in order to fight high inflation.

“After hearing Fed Chair Powell talk, it became clear the risk of more rate hikes was elevated,” Edward Moya, a senior market analyst at Oanda, wrote in his daily market newsletter. “...The Fed may raise rates at every other meeting, with the balance sheet runoff starting in May or June.”

But Moya added that the panic selling of cryptocurrencies may be over as a rally in alternative cryptocurrencies could be coming if bitcoin can stabilize at between $40,000 and $50,000.

Bitcoin Oversold Bounce Faces Resistance at $40K-$43K

Bitcoin rose from deeply oversold levels over the past two days, indicating renewed buying after a sharp sell-off. The cryptocurrency faces initial resistance at $40,000-$43,000, which could stall the current price bounce.

The relative strength index (RSI) on the daily chart is rising from extreme oversold levels, which could keep buyers active this week. On the weekly chart, the RSI is approaching oversold territory, similar to what happened last July in what was a prelude to a strong price rally.

Still, momentum signals remain weak, indicating limited upside from here. That means buyers will need to make a decisive move above $40,000 to signal a recovery phase.

For now, the downtrend from November remains intact with immediate support at $37,000 and lower support at $30,000.

Important events

8:30 a.m. HKT/SGT (12:30 a.m. UTC): Australia import and export price index (Q4 QoQ)

3 p.m. HKT/SGT (7 a.m. UTC): Switzerland imports and exports, trade balance (Dec. MoM)

9:30 p.m. HKT/SGT (1:30 p.m. UTC): U.S. durable goods orders (Dec.)

9:30 p.m. HKT/SGT (1:30 p.m. UTC): U.S. gross domestic product annualized (Dec.)

9:30 p.m. HKT/SGT (1:30 p.m. UTC): U.S. jobless claims, four-week average (Jan. 21)

In case you missed it, here is the most recent episode of "First Mover" on CoinDesk TV:

Crypto Markets Recovering From Steep Sell-Off Ahead of Federal Reserve Meeting, Animoca Brands’ Latest Funding Round

Dexterity Capital Managing Partner Michael Safai joined "First Mover" hosts for an in-depth analysis of the crypto markets as investors anticipated the Federal Open Market Committee (FOMC) meeting at 2 p.m. (ET). Animoca Brands co-founder Yat Siu shared details of the firm's latest funding round. Plus, Avivah Litan, an analyst at Gartner Research, offered insights on criminal activities using crypto versus those using fiat currency.

How Bitcoin Contributions Funded a $1.4M Solar Installation in Zimbabwe: The long-running Sun Exchange has a pitch for environmentally conscious bitcoiners.

Miners Remain Unfazed by Crypto Sell-Off, Expect More M&A: While some miners may face difficulty raising equity or staying as profitable as before, many feel confident they can navigate the current downturn.

Criminals Still Find It Easier to Hide in Fiat Than Crypto: Lawbreakers can run, but not hide, in transparent cryptocurrency networks, Litan of Gartner Research argues. (From CoinDesk Privacy Week series)

Diem Mulling Sale of Assets to Pay Back Investors: Report: The Meta Platforms-led group developing the cryptocurrency has been in discussions with investment bankers about selling the project's intellectual property.

Solana Could Become the Visa of Digital-Asset World: Bank of America: Solana and other blockchains may snag market share from Ethereum over time, the bank said in a research note. (Jan. 12)

Tucked Inside Biden Infrastructure Bill: Unconstitutional Crypto Surveillance: Marta Belcher breaks down what you need to know about the Fourth Amendment, the Infrastructure Investment and Jobs Act and Section 6050i of the tax code. This op-ed is part of CoinDesk's Privacy Week.

Today's crypto explainer: Minting Your First NFT: A Beginner’s Guide to Creating an NFT

Other voices: Crazy for crypto but allergic to risk? (McKinsey)

"If the metaverse's biggest contribution ends up being a change in *shopping,* you might as well shut it down now. (Wall Street Journal reporter Paul Vigna) ... "Everyone has an inalienable right to associate privately, and ought to have a right to search for information anonymously. In other words, their personal information should belong to them, and they should be in complete control of it. Period." (Digital currency pioneer David Chaum for CoinDesk) ... There's also a lot of new money from cryptocurrency where people are just randomly making millions of dollars and they don't know what to do with it, so they're trying to buy stuff. I like coins for the aesthetics. I do not invest in cryptocurrency. I like something you hold in your hand that other people have held in the past and bought stuff with or saved. I like the history." (Rex Goldbaum to the New York Times) ... "Among other impacts, higher Fed interest rates usually draw capital away from speculative sectors because savers and investors are drawn to safer returns in government bonds. At the margins, this will inevitably pull value out of both tokens and crypto startups (along with tech and venture capital more generally)." (CoinDesk columnist David Z. Morris)