Contributed by Sudarsan Karki (SuperSudar)
Follow him on Medium
When it comes to trading cryptos, there is no shortage of indicators to use.
From moving averages to Elliott wave analysis, there are plenty of indicators that crypto traders use on a daily basis.
But, they are all technical analysis indicators.
Have you ever considered using macro indicators while trading cryptos?
Think Federal Open Market Committee (FOMC) meeting.
Designed by Author
FOMC meeting
Until 2021, many US crypto traders were not aware of the term “FOMC meeting”.
But now, in 2022, forget about the Americans, even the non-American ones are familiar with it.
Take a look at this chart I got from Google Trends.
Snapshot taken by Author
This chart shows worldwide interest in the term “FOMC meeting” over the past five years.
If you look carefully, you will see a spike in worldwide interest for the term “FOMC meeting” in 2022. The trend touches the value of 100, which according to Google, is “the peak popularity for the term.”
This proves that people are more interested in FOMC meetings in 2022 than they ever were before.
If you had observed the chart carefully enough, you would have spotted another spike crossing the value of 50 in late 2021, and doubted the statement I just made above.
Well, 2021 saw worldwide interest in “FOMC meeting” cross the value of 50 for the first time.
This was the beginning of the rise in interest in FOMC meetings for crypto traders.
If you ask me why, it is because this was when smart crypto traders used the “FOMC meeting” as an indicator to trade cryptos.
Don’t believe me?
Check the date in the chart – it’s late September 2021, a few days after September 19.
Now, check the snapshot below to see the date of the FOMC meeting held in September 2021.
Snapshot taken by Author
That was September 21–22.
Before we go deeper, if there is any reader who is seeing the word FOMC for the first time, allow me to expand the abbreviation for you.
FOMC stands for Federal Open Market Committee. It is the monetary policy committee of the Federal Reserve of America.
I have covered the Federal Reserve (Fed) and FOMC in detail in the article below.
Back to the topic, if you look at the crypto market, you will be surprised to see that September 21, the same day the FOMC meeting was held, was the day bitcoin saw its biggest downfall.
Snapshot taken by Author
On this day, bitcoin tumbled to below the $40K range to reach US$39,750.
This was an unexpected move because bitcoin had already crashed from US$52,920 to US$42,843 in one single day on September 7, the Bitcoin day.
Many people thought it was China FUD (Fear, Uncertainty, Doubt) which brought the crypto market down.
Only a handful of crypto investors like me were trying to educate people that it was not China to blame, but rather, the infamous Evergrande Crisis.
I even wrote an article to clear the doubts of many people in the crypto space.
But, now when I look back, I realize it was not just the Evergrande Crisis at blame; the FOMC meeting was equally, if not more, responsible for the September 21 correction in the crypto market.
Smart crypto traders start using this indicator
One point to note is that the crypto market corrected on the same day, not before, the FOMC meeting was held.
This was because no-one had expected the Fed to drop a bombshell by hinting at two possibilities:
- The beginning of quantitative easing (QE) tapering by the end of 2021.
- The first interest rate hike in 2022 instead of 2023.
Smart crypto traders immediately exited from their trading positions, leaving inexperienced retail crypto investors with no option but to hold their investment bags.
This would mark the start of smart crypto traders using “FOMC Meeting” as an indicator while trading cryptos.
Smart crypto traders use this indicator again
The next time smart crypto traders would use this indicator would be in January.
The narrative started to build up in December when everyone started muttering “inflation” all over social media.
This “inflation” was the same “inflation” that economists were warning about ever since the Fed’s money printer went “Brrr…” after COVID-19.
And” Brrr” it went as the Fed went on to print more than US$13 trillion USD in such a short time to prevent the economy from spiraling down.
This was about 30% of the total supply of USD.
Source: Twitter
Now, when December’s CPI (Consumer Price Index) data was out on January 12, people were shocked.
Inflation was at 7% — the highest since 1982!
Now, the Fed had to take action to curb inflation.
Whatever action they would take would be revealed during the FOMC meeting.
So, what did smart crypto traders do?
They used the same FOMC indicator to trade cryptos.
So, naturally, all eyes turned to January 25–26’s FOMC meeting.
This was the most highly awaited FOMC meeting in history.
If you scroll back up to the first screenshot I shared, you will notice that the term “FOMC meeting” reached its peak of worldwide interest around the same time.
Let me share the same data with a shorter time frame.
Snapshot taken by Author
Smart crypto traders did not take any major trading position until the FOMC meeting date.
It was just some retail investors buying the continuously dropping dip in the hope that institutional money would pour into crypto, and crypto would pump as many crypto influencers had promised.
Liquidity dried up across all crypto exchanges as smart crypto traders patiently waited.
Just one day before the FOMC meeting, the crypto market tanked in fear that the Fed would start quantitative tightening (QT), and increase interest rate hikes 6–8 times in 2022.
Bitcoin fell down to US$32,917, its lowest point for 2022.
This is when smart crypto traders bought the dip.
And, their FOMC indicator worked!
Bitcoin’s lowest point for 2022 was on January 24, one day before the FOMC meeting.
Point to be noted here is that the market dropped one day before the FOMC meeting, not on the same day, because smart crypto traders already knew that the Fed would not and could not take any hawkish action against inflation due to several factors such as debt-to-GDP ratio (gross domestic product), China and European countries planning on starting QE etc.
Smart crypto traders use this indicator yet again
March came and the same indicator worked yet again.
The FOMC meeting was held between March 15–16 and bitcoin dropped to US$37,555 just one day before the meeting.
This is when smart crypto traders bought the dip again
I know this was not a significant drop because many people had already realized that the Fed’s hands were tied up and they could not do much.
The reason for people to believe so was the “expedited meeting”.
On February 15, the Fed held an “expedited meeting”, but they did not come up with any significant decision against inflation.
Will the Crypto market see another dip?
Now, the next FOMC meeting is on May 3–4.
Smart crypto traders will be using the FOMC meeting as an indicator as usual.
But the big question is: Will You?
(Disclaimer: I am not a financial advisor. Please use my articles to educate yourself on cryptocurrencies, but not as a sole factor to influence you to blindly jump into cryptocurrencies.)
Contributed by Sudarsan Karki (SuperSudar)
Follow him on Medium
