Bitcoin at $23,000: Crypto Community Awaits Fed’s Decision

The Federal Open Market Committee (FOMC), the Fed’s monetary policy committee, is largely anticipated to increase interest rates by 25 basis points

Monday saw a modest decline in the price of bitcoin and other cryptocurrencies, reversing weekend gains. The Federal Reserve’s interest rate decision which is scheduled on February 1 i.e Wednesday, is being anticipated by cryptocurrency traders as the next significant move which will likely be triggered by this decision.

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 rally to start the year, the largest digital asset is still at its highest levels since last August. Bitcoin surged by about 40% in a matter of weeks to make up for all losses since the collapse of the crypto exchange FTX in November which shook the markets.

Bitcoin is rapidly coming close to its important moving averages. According to website barrons.com, “the 200-week is little above $24,700 while the 50-week is currently trading at $24,500. It would be a strong sell signal if price breaks below these levels.”

Alex Kuptsikevic, an analyst at broker FxPro said, “The cryptocurrency market may regain trust if prices rise above the marked levels of barrons.com.” He further said that one should be ready for a prolonged consolidation or correction,before a clear upward move.

The Fed’s rate decision on Wednesday is expected to be the next significant catalyst for equities and digital assets alike, with bitcoin likely to follow the Dow Jones Industrial Average and S&P 500. Due to the macroeconomic backdrop of rising interest rates which reduces demand for both classes of risk-sensitive assets, cryptocurrencies have become correlated with 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 keeping an eye out for more accommodating language from the Fed such as indications that the central bank would suspend rate hikes in March or perhaps start reducing rates later this year, now that the smaller rate hike has almost certainly 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 mantra.”

Although it’s doubtful that bitcoin and its competitors will make a significant rise until Wednesday, speculators fighting for positions in the crypto derivatives market prior to the FOMC decision could result in some minor price changes. Investors may want a genuine injection 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. A muted Fed meeting can be seen negatively and cause at least a minor pullback.