- Bitcoin and other cryptocurrencies dropped on Wednesday, but they were somewhat more stable after falling from a 20-month high following a wave of selling earlier this week.
- Despite reduced gains, the largest digital asset still increased by over 50% in less than two months, ending a period of calm trading.
- Federal Reserve Chairman Jerome Powell’s press conference will be scrutinized for indications of when interest rate cuts might come.
The U.S. Federal Reserve will announce its last interest rate decision of the year today: Bitcoin volatility could increase with the interest rate decision!
Fed’s Interest Rate Decision to be Announced Today
Bitcoin and other cryptocurrencies dropped on Wednesday, but they were somewhat more stable after falling from a 20-month high following a wave of selling earlier this week. Traders are awaiting the policy decision from the Federal Reserve and examining significant technical levels.
The price of Bitcoin fell by 1% in the last 24 hours to $41,200, signifying a retreat from the peak above $44,000, the 20-month high where cryptocurrencies encountered a sharp and prolonged decline before April 2022.
Despite reduced gains, the largest digital asset still increased by over 50% in less than two months, ending a period of calm trading and leading to assessments as a herald of a new bull market.
Ruslan Lienkha, the market leader at YouHodler, stated, “The Fed decision appears to be short-term investors and traders taking profits after an impressive rally following the recent correction in the Bitcoin price. We don’t see leverage reduction in the market; crypto traders continue to take high risks. Therefore, we may see higher volatility in the near future.”
Digital assets have benefited from expectations that U.S. regulators will soon approve the first spot Bitcoin exchange-traded fund (ETF), bringing a new wave of investor interest in cryptocurrencies. The macroeconomic backdrop has also been supportive, as signs of declining inflation and slowing growth have forced traders to adjust their interest rate expectations. Now, it is likely that the Fed may see the possibility of cutting rates several times next year, perhaps as early as March.
Low-interest rates typically increase demand for risk-sensitive assets like tokens and stocks, which led Bitcoin to move alongside the Dow Jones Industrial Average and S&P 500 on Wednesday as investors prepared for the latest Fed decision. Markets are expecting the central bank to keep interest rates steady, but Fed Chairman Jerome Powell’s press conference will be scrutinized for indications of when interest rate cuts might come.
Fed’s Decision and Views on Medium-Term Holders
Analysts at crypto exchange Bitfinex noted in a report, “While expectations for the Fed’s decision may play a role, it is likely one of several factors influencing the Bitcoin price movement.”
“The real prices at this level should be crucial for medium-term holders (those who hold Bitcoin for 2-3 years), with $44,000 and above being very important, especially as this group controls over 16% of Bitcoin’s active supply,” wrote Bitfinex analysts. In other words, an influential block holder will be in the green at $44,000, potentially leading to further selling.
Beyond Bitcoin, the second-largest crypto, Ether, dropped 2% to $2,180. Smaller tokens or altcoins also painted a red picture, with Cardano dropping 4%, and Polygon slipping 2%. Memecoins were at a low as well, with Dogecoin falling 5%, and Shiba Inu losing 3%.
