The bitcoin (BTC) exchange rate has rebounded significantly, returning to around $65,000 after a recent low reached on Tuesday. The recovery comes ahead of the upcoming Federal Reserve meeting, which concludes on Wednesday and is expected to have a significant impact on the cryptocurrency market.
Bitcoin has hit all-time highs in recent weeks, reaching just under $74,000. However, it fell sharply on Thursday, and by early Tuesday its exchange rate was more than 15% below US$63,000. This drop caused a domino effect, pulling other digital assets down with it.
According to Vetr Lunde, a senior analyst at K33 Research specializing in digital asset analysis, "the market consensus expects rates to remain stable, but we will keep a close eye on the #dot plot adjustment as rates may slowly decline amid continued high inflation. " The dot plot reflects Fed members' views on interest rates for the coming year and gives investors an idea of what to expect from policymakers.
The drop in #bitcoin prices coincides with disappointing inflows into U. S. bitcoin ETFs over the past few days. Lunde believes this may be partly due to investors' reluctance to take risks until after the Federal Open Market Committee (FOMC) meeting.
A more hawkish stance from the Fed could reduce investor appetite for risk assets such as #cryptocurrencies , putting pressure on prices and prolonging the correction Joel Krueger, market strategist at LMAX Group, says: "Fed decisions this week are likely to be influenced by strong US economic data and risks, as well as inflation concerns, making policy less favorable for investors.
Krueger added that while the correlation between cryptocurrencies and traditional assets is low, the risk sentiment from the Fed's decision could spread to the #cryptocurrency market. Therefore, the cryptocurrency market and investors will be closely watching the outcome of the Fed meeting.
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