The more speculative assets won’t be able to reverse themselves in the short-term as the Fed has singlehandedly crashed the Santa Claus rally that was on the verge of breaking out at the beginning of the month.

Meme stocks, technology growth stocks, and yes, Bitcoin (BTC) have been main participants of the repricing occurring in the risk markets as we condition ourselves to a new narrative of rising rates.

Moving up the timeline of rate rises has in effect, crushed the performance of cryptocurrencies and the inflationary headlines have become worse in the past week.

This time is important because we will be able to understand how cryptocurrency behaves during a tightening cycle, and there isn’t much recent historical data to compare.

The last time the Federal Reserve initiated a path of tightening monetary policy, following a period of easing, in 2015, the price of Bitcoin was $465, or about a hundredth of its current price.

Disappointingly, Bitcoin hasn’t been the haven for investors in times of risk-off trading, boding ill for the short-term projection of higher Bitcoin prices.

It looks that we will need more time to drag out these hawkish headlines that will suppress the price of crypto before we go higher again.

Today did nothing to help Bitcoin with wholesale prices spiking 9.6% from a year ago, the highest level going back to November 2010.

Bitcoin’s place within financial markets has still not been fully decoded, but how it reacts in the coming days is likely to tell us much more.

As a reminder, the Fed Funds Rate is the rate that banks charge each other to borrow “reserves” overnight, and it is currently 0% – 0.25%.

In the 1970s, it took bold political maneuvering to endure that much economic damage when the Federal Reserve attempted to choke off inflation by repeatedly raising the Fed funds rate until it hit 21%.

It won’t be possible for the Fed to raise rates that fast or that much without triggering an economic recession.

In mid-June, the Fed talked about the possibility of raising rates almost 2 years from now, and stocks corrected.

The truth is that our debt servicing responsibilities are so onerous that the Fed is trapped in a corner.

Total Federal Debt is about $28 trillion and growing, while State and Municipal debt is approaching $4 trillion.

The interest paid by the Fed for its debt this year will be just under $400 billion.

If rates returned to levels not seen in the 1990s, the Federal government will not be able to service the debt and will need to claim bankruptcy which would be the event of a lifetime forcing an avalanche of capital into Bitcoin.

There is about $11 trillion of corporate debt in the U.S., and this may be the biggest headache of all.

The heavy reliance on cheap capital and government help means that over 600 zombie firms aren’t growing but exist to payout employees and shareholders.

Investors know this too and that is why stocks drop every time the mere mention of higher rates surfaces in the press.

The Fed is most likely to find excuses as to why 2022 is not actually the ideal time for rapid interest rate rises but we will get the minimal rises required for the Fed to save face.

My overarching point is that Bitcoin will need to go through a sideways correction for speculative assets to absorb these 180-degree pivots in monetary policy.

The hawkish pivot is still playing itself out and we have had to minimize our trading portfolio with December looking like a washout.

I believe we must continue down the path of a Japanization to protect the health of the US economy. This will almost certainly contain bedrock policies as continued low rates, anemic growth, and massive government intervention.

These trends will underpin the rising price of crypto.

Hyperinflation is great for the price of Bitcoin, but when the Fed looks seriously about killing it, the crypto market gets spooked.

This will pass through.

Awareness of safety is definitely a must with crypto — that’s not a shocker with it being a brand-new asset that many have a hard time contemplating.

It’s true that it’s a lot to wrap your head around.

Cryptocurrencies are speculative by nature. They lack traditional fundamentals, and a certain leap of faith is needed to invest in it.

It’s not easy for investors to analyze and assign a value to, and that’s where I come in to try to make sense of it.

Crypto markets are also less regulated in general, so it's easier to get ripped off.

Market manipulation is the intentional effort to artificially influence or interfere with asset prices.

Typically, scammers manipulate markets to tip the scales in order to accrue an unfair advantage.

Let’s go through the list of tricks that could be played on you.

Spoofing is done by placing fake buy or sell orders, which are canceled before they're filled.

Scammers use fake accounts and bots to place large trades, giving other investors the impression that demand is either increasing or decreasing.

Front-running is transacting based on knowledge of future transactions.

For instance, miners or node operators can have insight into pending trades. They could then leverage their inside access to make profitable trades ahead of major price swings.

It’s critical that investors migrate to voluminous, reputable, and transparent crypto exchanges and not try to get fancy with the middleman.

This makes a massive difference.

Another scheme is the pump and dump where fraudsters convince people to buy in, crypto schemers spread misleading information about minimally traded coins through social media.

They signal that a 10-fold increase in shares is imminent triggering hot new money then comes the dump.

As momentum builds, other investors cash in and drive the price up, while the schemers cash out and make a run for the exit.  

Another deviant scheme is when crypto developers abandon a project but keep the funds raised from investors.

Bad actors can list a new token on a decentralized exchange, pair it with a legitimate cryptocurrency, and drum up interest on social media to lure in investors.

They often pay for known celebrities to pass it off as a legitimate asset.

The whitewashing of the asset fools a bunch.  

Traditional hacking and theft targeting crypto wallets can be a digital or physical device.

These wallets have keys — both public and private. The former is a public address that allows crypto to be deposited into the wallet, similar to how routing and bank account numbers enable direct deposits.

The latter is like the password to an online banking platform. Whoever has access to that password can control the funds within the account.

Just as you wouldn't share your credit card number with a stranger, keep your private keys somewhere safe. Scammers can hack accounts and withdraw funds — and they'll employ various methods to get investors to reveal their private information.

Lastly, scammed via initial coin offering (ICO) is happening less and less as many cryptocurrencies do a better job establishing their credibility.

This is the crypto equivalent of an initial public offering (IPO) for a stock.

Through an ICO, companies can raise money to fund a crypto development, such as a token, app, or relevant service. In exchange for pledging funds, the investor receives an issuance of newly minted coins.

Similar to rug pull, ICO scams collect the funds of early investors only to abandon the project shortly after.

An easy way to recognize an ICO scam is to review the company's whitepaper. This document details the specifications behind the project, including strategy, goals, and market analysis.

If the company doesn't provide a whitepaper, that's a red flag.

Decentralized assets are not all unicorns and parabolic trading.

There is an ugly side of it devoid of standardized oversight and investors must stay on the lookout for these easily avoidable pitfalls.

Always double-check the broker, asset, and environment in which trading occurs. Never take anything for granted and err on the side of caution.

I am convinced that Congress will fail to act swiftly to head off the debt ceiling crisis that every trader should circle on their calendar.

December 15 is the day and that gives us only half a month for Congress to raise the federal debt limit, and Senate Majority Leader Charles Schumer and Minority Leader Mitch McConnell are miles apart.

Much of the trading these days is fueled by algorithms that decide on buying and selling based on the market data and this software is about to get bombarded with the U.S. possibly defaulting on their debt obligations.

The scare of a default or the perceived threat of a default, even if nobody thinks it will happen, will lend credibility for alternative assets namely Bitcoin and crypto-assets.

It’s hard for me to see Bitcoin not going up in the next 2 weeks and I believe traders should play from the $58,000 level which is the line of technical support.

Another flashing green indicator is the exploits of CEO of MicroStrategy (MSTR) Michael Saylor who has piled into the digital gold as his predominant strategy.

MSTR spent $414 million in buying 7,002 bitcoins yesterday.

MicroStrategy bought the coins at an average of $59,187 per Bitcoin. He added that following this latest acquisition, MicroStrategy now holds 121,044 bitcoins, and it used $3.57 billion to acquire them.

MicroStrategy is already profitable regarding its cryptocurrency investment. Its 121,044 bitcoins are worth $6.81 billion, a profit level of nearly 100%. There is not a bigger bull out there than Saylor who has staked his existence on the digital gold going higher.

Another positive indicator is the growing margin leverage ratio which shows more borrowed funds that will be bet on the price of bitcoin going up.

Less leverage in the system means less capital flowing to buy crypto.

What’s marinating in Washington?

Democrats insist that Schumer will not waste a week of Senate floor time to use the budget reconciliation process to raise the debt limit with only Democratic votes.

Both leaders hope to circumvent another brutal fight, but McConnell and Republicans are poised to really play hardball for this one.

McConnell was criticized for laying an egg during the last debt ceiling crisis and giving up negotiating leverage.

If McConnell doesn’t extract something on spending out of Democrats, especially when we’re looking at the Build Back Better bill possibly passing the Senate in some form, it’s an abject failure.

The conundrum is fueling predictions within the Senate that Treasury Secretary Janet Yellen will push the deadline for increasing the nation’s borrowing authority until January or February which is a positive event for the price of Bitcoin.

Yellen could find a couple of extra quarters in the cushions and push it to January or February, but it’s not a 2-foot putt.

Also, Democrats are nixing the Republican argument that Yellen has the flexibility to extend the deadline into January or February.

Yellen also warned leaders this month that the passage of the $1 Trillion Infrastructure Investment and Jobs Act gave her less room to maneuver because it requires a $118 billion transfer to the Highway Trust Fund by Dec. 15.

Bitcoin’s function as a rock-solid market hedge has never been more applicable as Congress is behaving almost as if money is unlimited and as if there are no consequences to that assumption.

What we are going to slowly see is that in terms of attractiveness, crypto will be that shiny wrapper compared to stocks and gold.

Even if the odds of a real default are almost zero, there could be some sort of technical default, Bitcoin will be that safe haven if the unthinkable comes to pass.

More and more people are coming to a realization they need a Plan B.

Back on the battlefield, it’s almost impossible in any plausible way that the inflationary genie with be bottled up any time soon unless it’s a nominal Fed speak victory.

The U.S. government is just too far past the point of possible return and whether it is labeled as the omicron variant, supply chain constraints, energy shortages, tight labor market, or however you want to fill in the blank, these events are almost all entered through the narrow prism of politics intersected with politics and the output is inflation.

Inflationary in the sense they add costs to either the national debt or the cost of existing as a human in the modern world and sooner than later, everyone will conclude the only way to counteract these forces are alternative assets or cryptocurrencies