Following the most recent monetary policy decision by the Federal Reserve on Thursday, investors flooded back into riskier assets, driving up the price of Bitcoin and other cryptocurrencies.
Bitcoin’s value rose by $8000, or 8 percent, in the preceding day, to $23,000. Following the Fed’s announcement of its monetary policy on Wednesday afternoon, Bitcoin has slowly grown from a low of roughly $18,000 in June to a high of almost $24,000 most recently, before declining once more as markets prepared for this volatile week.
However, the short-term picture for Bitcoin is still somewhat uncertain, according to Yuya Hasegawa, an analyst at Bitbank.
At this moment, digital assets seem nearly exclusively dependent on macro factors. Even though crypto-specific circumstances (such as the collapse of hedge fund Three Arrows Capital or a regulatory investigation into exchange Coinbase Global have affected price), the dominating element is still the vital link between cryptocurrencies and equities.
Cryptocurrencies like Bitcoin and ether should trade separately from traditional financial markets. Still, in practice, they have significant associations with equities, particularly technology companies, and have followed the S500 and Nasdaq down in a selloff this year. In addition, the market value of cryptocurrencies has decreased.
Inflation at a multidecade high and the Federal Reserve’s reaction to it are now the most influential macro forces. On Wednesday, the Federal Reserve announced that it would increase interest rates by 75 basis points, or 0.75 percentage points.
Stocks and cryptocurrencies rose on the back of the Fed’s pledge to combat inflation and signs that rate rises would slow down soon.
The possibility of a recession remains. This is the fourth interest rate rise this year and the second since June 1994. An interest rate increase is in the works at the Federal Reserve, and dampening economic demand has raised concerns that it might trigger a recession in the United States. For some time, this doubt will remain a cloud over the market for digital assets.
All markets are floundering. Chris Terry, an executive with the loan platform SmartFi, wrote in a letter that unless the economy “beaks up, not much is going to happen.” We expect Bitcoin to maintain its current trading range of $20,000 +/- 15%. Indeed, this should not be shocking news. The market may remain stagnant for quite some time.
There are other indicators in the crypto futures market that the current Bitcoin boom may be cooling. For example, more than 90% of all cryptocurrency transactions are derivatives trades, such as futures and options based on digital tokens. According to cryptocurrency market statistics provider CryptoCompare, in June, the number of derivatives traded on exchanges was $2.8 trillion, while the number of tickets exchanged was $1.4 trillion.
An unfavorable change in options is only one of the warning indicators that this crypto surge may not last. Luke Farrell, a trader at crypto market maker GSR, said that the technicals had “flipped,” making it more difficult for cryptocurrency prices to continue surging on short covers.
The term “short covering” is the process by which traders who have bet that an asset’s price would decline must purchase back the support to complete their short position, increasing the market’s demand for the help.
For the remainder of the summer, “my estimate is consolidation between…$19,000 to $23,000 for Bitcoin,” Farrell added.
In addition to Bitcoin’s price growth, the price of Ether (the second biggest cryptocurrency, at ETHUSD +1.29 percent) also increased by 12 percent, reaching $1,650. Altcoins, or supplementary cryptocurrencies, such as Solana and Cardano, were also jumping, each by 9 and 7 percent, respectively. Memecoins, created as online jokes, also rose in value; Dogecoin (DOGEUSD) increased by 1.05 percent, while Shiba Inu (MINU) increased by 7 percent.
