So what's up with the Bitcoin price?

Key points: 

• Ahead of the Federal Open Market Committee (FOMC) meeting, there have been some unconfirmed leaks that the Fed and the White House are considering "policy pivots."
• Several on-chain metrics are at multi-year lows, and there is enough precedent to suggest that current upside gains far outweigh downside potential.
• While the data can’t confirm whether a market bottom is actually in place, comparing the current reading to previous market cycles and Bitcoin’s price action shows that BTC is undervalued in its current range.

Traders and so-called analysts have been predicting a change or pivot in Fed policy since March 2022.

Clearly, such a move would prove that the only option available to the Fed is to be forgotten, devalue the dollar further, and anchor Bitcoin as a future reserve asset and ultimate store of value.

Well, on November 2nd, stocks and cryptocurrencies rose as usual when the Fed raised expectations for a 0.75% rate hike.

But this time there was a twist. Ahead of the Federal Open Market Committee (FOMC) meeting, there have been some unconfirmed leaks that the Fed and the White House are considering "policy pivots."

Based on FOMC comments and Jerome Powell's press conference, Powell emphasized that the Fed understands and monitors how policy affects markets, and the delay in raising rates is acknowledged and explained.

The Fed said:

“In order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

That sounds a bit like a pivot, right? Crypto markets didn’t seem to believe this, with bitcoin, altcoins, and stocks all retracing their brief single-digit gains shortly after Powell’s live comments.

The shocking thing here is not that Bitcoin’s price fell ahead of the FOMC meeting, rebounded after an estimated rate hike was announced, and then fell before exchanges closed. This is to be expected and I wouldn't be surprised if BTC returns to the low end of $21,000 as $20,000 seems to be solid support.

Surprisingly, some key language emerged without the market reacting accordingly. Make it a lesson in the deep narrative.

In my opinion, trading the FOMC, CPI, and raising interest rates is not the way to go. Of course, if you are a day trader with deep pockets to take advantage of this 2% or 4% volatility or an experienced qualified professional trader, then go for it. But as Jarvis Labs' chart below shows, trading the FOMC and CPI can really take traders by surprise.

I believe that intraday bitcoin price action on less than a daily time frame is irrelevant if your motivation is to go long bitcoin and increase your stack size. So instead of focusing on micro-events like, for example, as the Fed continues to hike rates, the policy it stuck with until inflation fell to its 2% target, let's look at other metrics that assess Bitcoin's current market structure and expected performance.

On-chain data suggests it’s time to start rallying

On Nov. 1, Capriole Investments founder Charles Edwards launched a new on-chain indicator called Bitcoin Yardstick. According to Edwards, the metric "takes Bitcoin market cap/hash rate and normalizes (divides) by a 2-year moving average" to essentially capture "the ratio of energy work done to protect the Bitcoin network relative to price".

Edwards stated that “lower readings = cheaper bitcoin = better value”, arguing:

“Today we are seeing valuations unheard of since Bitcoin was $4-6K.”

Similar to Glassnode’s recent report, Edwards also believes that long-term holders have capitulated. Edwards, citing the following table, said:

“Net unrealized profit and loss (NUPL) is showing a washout in long-term holders. We have entered the capitulation zone (red) seen only once every 4 years in the past.”

Several on-chain metrics are at multi-year lows, and there is enough precedent to suggest that current upside gains far outweigh downside potential.

Is the Bitcoin MACD Histogram Turning Bullish?

Another indicator that is making waves in trading circles is the Moving Average Convergence Divergence (MACD). Throughout the week, the indicator was cited by several traders, noting the convergence between the signal line and the MACD and the histogram turning "green" on the weekly time frame, a sign that Bitcoin is in the process of bottoming Encouraging signal.

Although the indicator should not be interpreted as a purely isolated signal, the crossover of the weekly and monthly timeframes and the change of the histogram from red to green is usually accompanied by a steady increase in bullish momentum.

While the data can’t confirm whether a market bottom is actually in place, comparing the current reading to previous market cycles and Bitcoin’s price action shows that BTC is undervalued in its current range.

The price of BTC could form a bottom, but that doesn’t rule out the occasional cryptocurrency and stock market-driven sell-off that could prompt a swift drop to yearly lows.