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Bitcoin
and other cryptocurrencies were slightly lower Monday, paring gains after a rally over the weekend. Crypto traders are awaiting the Federal Reserve decision on interest rates due Wednesday, which is likely to be a catalyst for the next big move.
The price of Bitcoin has declined less than 1% over the past 24 hours to $23,250, having come within striking distance of $24,000 in a spike over the weekend. The largest digital asset remains at the highest levels since last August after a roaring rally to start the year, with Bitcoin jumping some 40% in a matter of weeks to erase all losses since crypto exchange FTX’s bankruptcy in November rocked markets.
“Bitcoin is gradually approaching its key moving averages. The 200-week is just above $24,700, and the 50-week is now at $24,500. A break below these levels would be a strong sell signal. A rebound above them could restore confidence in the crypto market,” said Alex Kuptsikevic, an analyst at broker FxPro. “But be prepared for a prolonged consolidation or correction before a decisive move higher.”
Traders are eyeing Wednesday’s rate decision from the Fed as the next major catalyst for stocks and digital assets alike, with Bitcoin likely to take its cues from the
Dow Jones Industrial Average
and
S&P 500.
Cryptos have become correlated with equities over the past year amid a macro backdrop of rising interest rates, which dampen demand for both classes of risk-sensitive assets.
The Federal Open Market Committee (FOMC), the Fed’s monetary policy group, is widely expected to raise interest rates by 25 basis points, or one-quarter of a percentage point, after a spate of much larger rate hikes last year. With the smaller rate hike all but priced in, investors will be watching for more accommodative language from the Fed such as signals that the central bank will pause rate hikes in March, or even begin cutting rates later this year.
“Bitcoin should still consolidate leading up to the FOMC decision, with risks to the downside if the Fed sticks to its hawkish mantra,” said Edward Moya, an analyst at broker Oanda.
It’s unlikely that Bitcoin and its peers will make a decisive move until Wednesday, though traders jockeying for position in the crypto derivatives market leading up to the FOMC decision have the potential to lead to some smaller moves in prices. After the eye-popping rally in Bitcoin so far this year, investors may need a real injection of optimism from the Fed to facilitate more gains for the cryptocurrency. A muted Fed meeting could be read negatively and usher in at least a small correction.
“Bitcoin could continue to struggle to pick a direction at the current level until this week’s big event: the FOMC meeting,” said Yuya Hasegawa, an analyst at crypto exchange Bitbank. “The Fed is expected to decide on another slowdown on the pace of rate hikes this week but their move is well priced in already, and could encourage the market to ‘sell on the fact’ if they do not hint at rate hike pause at the March meeting and/or rate cuts within this year.”
Beyond Bitcoin,
Ether
—the second-largest crypto—shed 1% to just short of $1,600. Smaller cryptos or altcoins were weaker, with
Cardano
down 3% and
Polygon
4% in the red. Memecoins exhibited much of the same, with both
Dogecoin
and
Shiba Inu
slipping 3%.
Write to Jack Denton at jack.denton@barrons.com
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