Bitcoin and other cryptocurrencies experienced a decline on Wednesday, but have since found some stability following a selloff earlier this week that caused prices to drop from a 20-month high. Traders are eagerly awaiting a policy decision from the Federal Reserve while keeping a close eye on key technical levels.
Bitcoin's Recent Performance
Over the past 24 hours, the price of Bitcoin has fallen by 1%, currently sitting at $41,200. This retreat comes after reaching a recent peak above $44,000, marking its highest level since April 2022, prior to the cryptocurrency market facing a harsh and lengthy bear market. Despite the recent pullback, Bitcoin has still seen an impressive surge of over 50% in less than two months, signaling the end of a period of subdued trading and igniting speculation about a new bull market.
Profit Taking or Elevated Risk?
According to Ruslan Lienkha, chief of markets at fintech platform YouHodler, the recent correction in Bitcoin's price appears to be a result of profit-taking by short-term investors and traders after an impressive rally. However, Lienkha also highlights that the market has not shown signs of significant deleveraging, suggesting that crypto traders continue to take on elevated risk. As a result, we may experience even higher volatility in the near future.
Anticipation for a Bitcoin ETF
Digital assets have been benefiting from the anticipation surrounding the potential approval of the first spot Bitcoin exchange-traded fund (ETF) by U.S. regulators. This approval is expected to usher in a fresh wave of investor interest in cryptocurrencies. Additionally, the macroeconomic backdrop has also played a role, as signs of decreasing inflation and slowing growth have prompted traders to adjust their expectations for interest rates. Many now anticipate the Federal Reserve cutting borrowing costs multiple times next year, with the first cut possibly taking place as soon as March.
In conclusion, despite a recent selloff, Bitcoin and other cryptocurrencies are showing signs of stability. With traders eagerly awaiting the Federal Reserve's policy decision and the potential approval of a Bitcoin ETF, the future of cryptocurrencies remains intriguing and full of potential.
Lower Rates and Bitcoin
Lower rates tend to boost demand for risk-sensitive assets, such as tokens and stocks. This is why Bitcoin's performance is closely tied to the movements of the Dow Jones Industrial Average and S&P 500. Investors are eagerly awaiting the latest decision from the Federal Reserve, which is expected to keep rates steady. However, all eyes are on Fed Chairman Jerome Powell's press conference at 2:30 p.m. Eastern time, as analysts are looking for hints about potential rate cuts in the future.
The anticipation of the Fed's decision is just one factor influencing Bitcoin's price movement. Analysts at crypto exchange Bitfinex highlight the significance of market technical factors, including historically tight token supply and the possibility of profit-taking. These factors have contributed to the sharp gains in Bitcoin's value.
The $44,000 mark is seen as a crucial level for mid-term holders of Bitcoin (those who have held it for 2-3 years). This cohort controls over 16 percent of the active supply, and many of them will start making profits if Bitcoin surpasses this level. This could potentially trigger further selling in the market.
While Bitcoin is in focus, other cryptocurrencies are also experiencing fluctuations. Ether, the second-largest crypto, has fallen by 2% to $2,180. Smaller tokens or altcoins like Cardano and Polygon are also in the red, with losses of 4% and 2% respectively. Even memecoins like Dogecoin and Shiba Inu are facing declines, dropping by 5% and 3% respectively.