Bitcoin paused its rise after initially breaking the $108,000 mark, with traders waiting for the Federal Reserve's possible rate cut decision while assessing the optimism brought about by President-elect Donald Trump's support for cryptocurrencies.
Bitcoin reached an all-time high of $108,315 on Tuesday, but had fallen back to around $106,400 by Wednesday morning. According to CoinGecko, this round of gains brought the total market capitalization of digital assets close to $4 trillion.
Trump has promised to implement friendly cryptocurrency regulations aimed at establishing U.S. dominance in the crypto space and supporting the creation of a strategic national Bitcoin reserve. Additionally, the impending inclusion of MicroStrategy in the Nasdaq 100 index has also boosted market sentiment. The company primarily invests in Bitcoin by raising funds, and the potential rise in its stock price has attracted more attention.
The market widely expects the Federal Reserve to cut interest rates by another 25 basis points on Wednesday, but the policy outlook remains uncertain due to strong U.S. economic growth and inflation risks stemming from the broader agenda of the newly elected president.
Analysts Vetle Lunde and David Zimmerman from K33 Research wrote in a report: "We expect this week's Federal Open Market Committee (FOMC) meeting to intensify market volatility. Following the FOMC meeting, a calmer macroeconomic period is likely to set the stage for further Bitcoin gains during the holiday period."
Since Trump won the presidential election on November 5, the price of Bitcoin has risen by more than 55%. Despite warnings about the cryptocurrency's historical volatility, signs of excessive momentum, and skepticism over the lack of traditional valuation metrics, investors are still flocking to Bitcoin exchange-traded funds (ETFs) in the U.S.
At the Deribit options exchange (a major cryptocurrency derivatives platform), bullish bets are primarily concentrated at an exercise price of $120,000. Open contracts refer to the number of contracts that have not yet been settled.
However, Tony Sycamore, a market analyst at IG Australia Pty, stated that investors should be "cautious about chasing prices" at the current level. For example, Bitcoin's price on Tuesday jumped from an initial level of about $106,000 to an all-time high, but then fell back to the starting level.
