Bitcoin, Ether Dip Despite China Rate Cut

The latest moves in crypto markets, in context

Edited by Omkar Godbole

December 20, 2021

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Good morning, and welcome to First Mover. Here's what's happening this morning:

Market Moves: Bitcoin, Ether Dip Despite China Rate Cut

Technician's Take: Bitcoin Sensitive to Tech Cycle

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Market Moves

by Omkar Godbole

Bitcoin and ether were again trading lower in Asian hours, continuing the year-long trend of losing ground mainly when America is asleep. The decline comes as traditional markets turn a blind eye to China’s interest rate cut and remain risk-averse.

Data provided by options trader Fredrick Collins shows that bitcoin and ether have consistently faced selling pressure during the Asian hours this year. Most of year-to-date gains made by bitcoin and ether, 60% and 420% respectively, have come during the American hours, represented by 8:00 am to 6:00 pm New York time. Further, Asia has been the driver of the recent sell-off in bitcoin.

The trend continued on Monday despite the People’s Bank of China (PBOC) taking steps to cushion the economy from the negative impact of property market woes and renewed coronavirus concerns.

The Chinese central bank announced a cut in its one-year loan prime rate, a de facto benchmark rate since 2019, from 3.85% to 3.8%, confirming the first reduction in nearly two years.

Interest rate cuts tend to inject liquidity into the economy. Thus, perceived inflation hedges like bitcoin, gold, and asset prices, in general, typically react positively to rate cuts. However, Asian equities traded lower alongside a 1.10% drop in the futures tied to the S&P 500. Oil prices slipped more than 3% and the anti-risk currencies like the Japanese yen are drawing safe-haven bids.

The market action suggests China’s rate cut is perhaps too small compared to the impending tightening by the Fed and other central banks. Last week, the Fed signaled three rate hikes in 2022 and the Bank of England delivered a surprise interest rate hike.

Read the full story here:

Bitcoin, Ether Dip in ‘Bearish Asia Session’ as China Rate Cut Fails to Inspire Risk Buying

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Technician's Take

by Omkar Godbole

Bitcoin Sensitive to Tech Cycle

Bitcoin's weekly chart (Source: TradingView)

The weekly chart above shows that bitcoin tends to do well when tech stocks outperform the broader market.

With the Nasdaq/Dow Jones ratio teasing a rising trendline breakdown or tech underperformance ahead, the path of least resistance for bitcoin appears to be on the lower side.

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Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.

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