Cryptocurrencies were mixed Thursday as traders digested news that the Federal Reserve plans to slash rates more than expected in 2024. Stocks extended their Fed-fueled rally that saw the Dow Jones Industrial Average surpass 37,000 for the first time.
Bitcoin, which initially rose as much as 2.6% Wednesday following the central bank’s announcement, faltered Thursday, dipping 1% to hover around $42,500. Bitcoin, while down 2.3% over the past five days, is still on track to end the year well into the green, currently sitting close to 160% higher year-to-date.
Ether (ETH) also bounced following the Fed’s Federal Open Markets Committee meeting, and managed to sustain the rally into Thursday. The token is up about 1% over the past 24 hours and more than 90% year-to-date.
Read more: Bitcoin has rallied. But where is the price going next?
Equities continued their modest rise Thursday afternoon after Wednesday’s rally. The S&P 500 and Nasdaq Composite Indexes gained around 0.5% while the Dow Jones Industrial Average posted a 0.3% increase after Wednesday’s historic close.
The Fed’s Summary of Economic Projections (SEP) shifted Wednesday, showing three rate cuts in 2024, as opposed to the previous expectation of two.
“The FOMC’s quarterly Summary of Economic Projections rarely moves markets, but [Wednesday] was an exception,” Nicholas Colas, founder of DataTrek Research, said.
Fed Chair Jerome Powell was careful to avoid too many predictions for the economy in 2024, but he did say that the last point of inflation reduction may prove more difficult to hit.
“The biggest surprise this year was that there was no US recession,” Colas said. “That doesn’t guarantee anything in terms of 2024, however.”
As 2023 approaches its close, crypto investment firms and analysts are once again putting in their predictions for 2024.
Bitwise Asset Management is calling for bitcoin (BTC) to hit an all time high of $80,000 in the new year, about a $15,000 increase from the crypto’s last top in 2021. While Bitwise did not release a 2023 price target at the start of this year, the asset manager did predict a decrease in bitcoin’s correlation with stocks.
The projection proved to be somewhat true; bitcoin’s correlation with the S&P 500 did dip as low as -0.76 in November 2023, but it was back to 0.72 this week. Bitcoin’s correlation with equities has repeated this pattern several times throughout the year so far, dipping into the negatives before soaring back above 0.5 in a matter of weeks.
Analysts say the correlation whipsaws as macroeconomic factors shift and force moving markets, both crypto and stocks. But crypto-specific tailwinds and headwinds, like optimism that a bitcoin exchange-traded fund may soon hit the market, are still the dominant force moving token prices.
Don’t miss the next big story – join our free daily newsletter.
Source: https://blockworks.co/news/bitcoin-falters-pending-fed-decision