As of January 2022, the crypto market has a total market cap of $2.07 trillion dollars. It is significantly down from the $3 trillion USD market cap from October 2021. Bitcoin alone is down 40% from its ATH. While the argument still remains that BTC is a hedge against inflation, the numbers and data proves otherwise. As seen recently, the crypto market is directly following the US stock market. As for Bitcoin and Ethereum, they can be considered as risk-on assets rather than hedging assets. Considering the Federal Reserve’s latest announcements, it would be safe to argue that the inflation and the stock market will dictate the next phase for crypto market.

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Crypto Market Bull Trap?

Time and time again we have heard analysts and Bitcoin maximalists call Bitcoin a better hedge against upcoming inflation. However, 2022 woke up and chose violence against equity markets. Long and short of it, during the Covid lockdowns the world economy took some damage. The US government printed USD at insane rates and devalued the world reserve currency. Despite the severity of such Marxist actions, it took a while for the economy to show signs of market crash for numerous reasons. Primarily, a majority of people invested in the markets specially in the crypto market. The lockdowns were the time when companies like Apple and Amazon and even Bitcoin saw record highs.

As of early 2022, the Federal reserve is no longer calling the inflation “tRaNsitOry” and is planning to fight it. In plain and simple terms, it means that they can no longer deny the objective truth. And to compensate for the losses, the Fed is now turning hawkish planning multiple rate hikes and the tapering of asset purchases for 2022.

Rising interest rates will most definitely worsen the inflation and leave a dent in any and all equity markets. And in contrast to what the social media “Professionals” said, Bitcoin and crypto market follow the stock market and inflation.

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And what will happen to the crypto market? In short, altcoins follow BTC 99.9% of the time. Although Bitcoin’s dominance is currently very low at 39.79% (January 2022), it will still determine the market’s direction. In that regard, for the next phase of the crypto market, we should look at how BTC will react to the stock market and the inflation.

The US government will release inflation data on January 12 and it will surely dictate the next phase for the crypto market. The Federal reserve is willing to bring the markets down to keep inflation on a leash. If the consumer price index (CPI) goes high, the crypto market will turn bearish and take a hit. On the other hand, if the CPI goes down (which is a miracle and impossible) Bitcoin will have a rally. In short, Bitcoin and in general the crypto market will follow the stock market at least for the time being.

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