We Dine in Hell?

Markets have somewhat recovered following no unexpected tightening announcements coming out of Wednesday’s Federal Reserve Open Market Committee meeting that was hotly awaited.

However, the relief bounce has already run out of steam. It seems the broader mood in the market remains pessimistic for now.

The main question now is: how low can we go? In the 2021 summer low, BTC briefly touched the $30k level, and below on some exchanges, just to bounce back from it. What followed was the autumn rally to $69k.

Many smart observers, like Bitmex founder Arthur Hayes, see BTC support at $28,500 and ETH support at $1,700. But what if we drop lower? Historically, neither BTC nor ETH breached the All-Time-High from a previous cycle in the following Bear Market. For that to happen, BTC would need to drop to $20k and ETH to below $1,400.

Should that happen, the mood would turn wildly negative as this would destroy significant support expectations held by most market players. Luckily, we are still far from such Doomsday Scenarios. The upside potential remains a more dovish Federal Reserve, which ironically could follow if geopolitical tensions escalate in Eastern Europe.

Also, what would happen, if more states follow El Salvador’s lead and react to USD inflation by declaring BTC a legal tender? Word on the street is that some big players expect this to happen in 2022. The consequence would surely be a re-evaluation of BTC as an asset class: from a high-risk tech play to a macro asset, not unlike gold or oil. Rarely has the line between Hell and Heaven been so thinly balanced. Tread carefully.