With massive price action in multiple markets, it may be time to look at the macroeconomic reasons behind Bitcoin’s (BTC) attempt at a bottom. To decipher what is happening today, you have to look at other markets to explain Bitcoin’s (BTC) up move.

Was Crypto an Equities Hedge?

The Fed meets to make a key interest rate decision on Dec. 19. The Fed is expected to raise rates, but a lot of people are publicly saying that the Fed should not raise rates.

Ahead of the meeting, it looks like traders are buying crypto and selling stocks. Stocks are measured here by the S&P 500 ETF (SPY). It would seem that big hedge funds may have been using crypto as a hedge to protect their stock positions. Today, they may be just unwinding everything. They buy back the crypto futures, sell out the equities, and go home for the Holidays.

If this is true, it would explain why crypto is way up, and SPY is pressing major support near $254 (Figure 1). If SPY really cracks that level, the next really big support could be at $209. That would be a decline of 20 percent (Figure 1). Such a move would likely lead to a big negative shock to the U.S. economy.

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While a stock market crash is very possible, it is hard to believe that the Fed would purposefully create a Christmas crash in equities. So, it seems a rate hike is in nobody’s interest.

Is the Dollar Topping?

So what happens if the Fed does not raise rates on Dec. 19. Well, one thing that might happen is the U.S. dollar Index (DXY) could make a major top. Looking at the DXY chart, the dollar is primed to go down (Figure 2). DXY’s monthly chart shows the dollar is right up against a big Fibonacci speed line.

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The only way to know if the Bitcoin ($BTC) bottom is real is to see the U.S. dollar (DXY) fall in tandem. So, a Bitcoin (BTC) rally requires cooperation from the Fed by having them abstain from hiking rates. If the Fed hikes rates and/or the dollar does not go down, I would be careful of chasing any Bitcoin (BTC) rally.