and other cryptocurrencies fell Wednesday but were holding somewhat steady after a selloff earlier this week knocked prices down from a 20-month high. Traders were awaiting a policy decision from the Federal Reserve and eying key technical levels.
The price of Bitcoin has fallen 1% over the past 24 hours to $41,200, retreating further from its recent peak above $44,000, which marks the token’s highest level since April 2022—before cryptos plunged into a brutal and prolonged bear market. While it has pared gains, the largest digital asset still has surged more than 50% in less than two months, ending a period of subdued trading and sparking calls of a new bull market.
“The recent Bitcoin price correction seems more like profit [taking] by short-term investors and traders after an impressive rally,” said Ruslan Lienkha, chief of markets at fintech platform YouHodler. “We don’t see deleveraging in the market; crypto traders are continuing to take an elevated risk. For this reason, we might see even higher volatility in the near future.”
Digital assets have benefited from anticipation that U.S. regulators will soon approve the first spot Bitcoin exchange-traded fund (ETF), expected to usher in a fresh wave of investor interest in cryptos. The macroeconomic backdrop also has helped, with signs of waning inflation and slowing growth pushing traders to adjust expectations for interest rates. They now see the Fed cutting borrowing costs multiple times next year, perhaps as soon as March.
Lower rates tend to boost demand for risk-sensitive assets—like tokens and stocks—which primes Bitcoin to react with the
and
on Wednesday as investors ready for the latest Fed decision. While markets expect the central bank to hold rates steady, the press conference from Fed Chairman Jerome Powell at 2:30 p.m. Eastern time will be scrutinized for signs of when rate cuts could come.
Advertisement – Scroll to Continue
“While the anticipation of the Fed’s decision might play a role, it’s likely one of several factors impacting Bitcoin price movement,” analysts at crypto exchange Bitfinex wrote in a note.
Indeed, while the Fed decision could be the next catalyst for Bitcoin, analysts are also eying market technical factors, including historically tight token supply—which has helped supercharge gains—and the prospect of more profit-taking.
“$44,000 and above should be pivotal as mid-term holders (those holding Bitcoin for a period of 2-3 years) have their realized price at that level, this is increasingly more significant when you consider that this cohort controls over 16 percent of the active supply,” the Bitfinex analysts wrote, with realized price referring to a metric similar to cost basis. In other words, an influential block of holders will be in the green come $44,000, which could prompt further selling.
Beyond Bitcoin,
—the second-largest crypto—fell 2% to $2,180. Smaller tokens or altcoins were also in the red, with
down 4% and
slipping 2%. Memecoins were also in the dumps, with
dropping 5% and
Advertisement – Scroll to Continue
shedding 3%.
Write to Jack Denton at jack.denton@barrons.com
Read More:Bitcoin Prices Have Stalled. Why the Fed and the $44,000 Level Are Key.
2023-12-13 09:31:00