After rallying over the weekend, Bitcoin and other cryptocurrencies were slightly lower on Monday, trimming gains. The Federal Reserve’s interest rate decision, which is scheduled on Wednesday, is being awaited by cryptocurrency traders as it is likely to trigger the next significant shift.
After briefly approaching $24,000 over the weekend, the price of Bitcoin has dropped by less than 1% in the last 24 hours to $23,250. After a ferocious run to start the year, the largest digital asset is still at its highest levels since last August. Bitcoin surged by around 40% in a few of weeks to reverse all losses following the market-shaking collapse of cryptocurrency exchange FTX in November.
Bitcoin is steadily drawing closer to its important moving averages. The 50-week is currently at $24,500, while the 200-week is a little above $24,700. It would be a strong sell signal to break below these levels. Expert Alex Kuptsikevic at broker FxPro believes that if prices increase above them, the bitcoin market may regain confidence. But before a clear upward advance, be ready for a long consolidation or correction.
The Fed’s rate decision on Wednesday is anticipated to be the next significant catalyst for equities and digital assets alike. Bitcoin is anticipated to follow the Dow Jones Industrial Average and S&P 500. A macroeconomic backdrop of rising interest rates, which dampens demand for both types of risk-sensitive assets, has led to an increase in the correlation between cryptocurrencies and equities during the past year.
After a series of far higher rate hikes last year, the Federal Open Market Committee (FOMC), the Fed’s monetary policy committee, is largely anticipated to increase interest rates by 25 basis points, or one-quarter of a percentage point. Investors will be on the lookout for more accommodating language from the Fed, such as indications that the central bank may halt rate hikes in March or perhaps start reducing rates later this year since the lesser rate hike has almost already been priced in.
According to Edward Moya, an analyst at broker Oanda, Bitcoin should still consolidate leading up to the FOMC decision, with risks to the downside if the Fed adheres to its hawkish rhetoric.
Although it’s doubtful that Bitcoin and its competitors will make a significant move until Wednesday, traders vying for positions in the cryptocurrency derivatives market prior to the FOMC decision could result in some minor price changes. Investors may want a genuine jolt of optimism from the Fed after the eye-popping run in Bitcoin so far this year in order to permit further gains for the cryptocurrency. An underwhelming Fed meeting can be seen negatively and cause at least a minor correction.
The FOMC meeting is this week’s major event, and Yuya Hasegawa, an analyst at cryptocurrency exchange Bitbank, said that Bitcoin may continue to struggle to identify a direction at the current level. The Fed is anticipated to decide this week on another slowdown in the rate hike pace, but their decision is already highly anticipated and could encourage the market to “sell on the fact” if they do not hint at a pause in rate raises at the March meeting and/or rate cuts this year.
Ether, the second-largest cryptocurrency behind Bitcoin, decreased 1% to slightly under $1,600. Smaller cryptocurrencies or altcoins performed weaker, with Cardano down 3% and Polygon down 4%. Memecoins showed similar behavior, with 3% declines in both Dogecoin and Shiba Inu.
