A reduction in the balance sheet could trigger bigger Bitcoin losses than rate hikes, an analyst warns.
Bitcoin ( BTC ) fell at the open of Wall Street on Feb. 16 as markets remain uncertain on the US Federal Reserve's announced comments.
Data from Cointelegraph Markets Pro and TradingView shows BTC/USD falling to lows of $43,312 on Bitstamp at the start of trading.
The pair rose to $44,500 overnight but failed to hold the gain as traders await comment from the US Federal Reserve on inflation, asset purchases and the important rate hikes
With bitcoin and altcoins highly correlated with stocks, tough times for traditional markets due to rate hikes could also pose a problem for crypto investors.
The written document, which will be released later today, will also cover a Federal Open Market Committee (FOMC) meeting in late January.
Gina Martin Adams, chief equity strategist at Bloomberg Intelligence, argued the reduction in the Federal Reserve's balance sheets, which now total nearly $9 trillion, could be more painful for stocks than a rate hike.
“I'm still more concerned about the balance sheet than rate hikes. Since 2010, changes in the balance sheet have triggered nearly a third of the movement in the market multiple. Every 100 basis point decline in the balance sheet could lower the S&P 500 P/E by 29 basis points ", as she explained .
There was therefore an almost cautious mood among crypto traders, which ran counter to general cautious optimism.
"I still believe the upside is still on the up, but a short-term pullback and/or bumpy price action before breaking key resistances makes sense," noted Twitter account Crypto Chase in a comment .
For bitcoin trader and analyst Rekt Capital, the larger timeframes are more important than the hourly chart. After last Sunday's disappointment, the upcoming weekly closing price still has the opportunity to herald an upward trend.
Other indicators positive
A look at the composition of crypto exchange Binance's order book reveals more encouraging signs.
Additional buy support formed at $43,000 in the last 24 hours. There was also another support zone with larger volume just below $42,000.
At the same time, data from analytics service Material Indicators showed that sell-side orders are beginning to thin at $45,000.
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