Bitcoin
and other cryptocurrencies ticked higher Wednesday as investors awaited the latest Federal Reserve decision, which will be a test of the extent to which macroeconomic catalysts still matter to crypto traders.
The price of Bitcoin has edged up less than 1% over the past 24 hours to $34,450, around levels it has held for a week now but shy of its recent peak above $35,000—the highest point for the largest digital asset since May 2022 ushered in a brutal bear market. Bitcoin has rallied by some 30% since mid-October in a move that has shaken the cobwebs off of crypto markets, which were in a period of historically low volatility and trading volumes amid signs of waning investor interest.
“Recent price movements indicate that investors are growing more optimistic about Bitcoin,” said Konstantin Shulga, co-founder of trading firm Finery Markets. “Looking ahead, volatility indicators suggest that funds betting on Bitcoin’s price movement may be becoming less confident, indicating a possible cooling of sentiment. Even if we assume that we are witnessing a strong upward trajectory, it is not unusual to anticipate a minor pullback in the market.”
Bitcoin’s rally has led it to outperform the stock market in recent months, with gains coming amid optimism that the Securities and Exchange Commission (SEC) will soon approve the launch of spot Bitcoin exchange-traded funds (ETFs). These funds are widely expected to usher in a new wave of investor interest in cryptos and accelerate a new round of institutional adoption of digital assets. A “digital gold” narrative has also buoyed Bitcoin, with its correlation to stocks waning while a link to gold tightened amid geopolitical risks from conflict in the Middle East.
The prevalence of this crypto-native catalyst and Bitcoin’s decoupling from stocks make the Federal Reserve decision Wednesday on monetary policy particularly interesting. The
Dow Jones Industrial Average
and
S&P 500
are likely to move on the back of the decision, and Bitcoin would, typically, follow as well. While the Fed is widely expected to hold interest rates steady, the central bank could further detail the pathway for borrowing costs moving ahead, which tends to have a bearing on risk-sensitive assets like stocks and cryptos.
Bitcoin has been trading independently of stocks, which have whipsawed in recent weeks on the back of macro developments. The Fed decision may be a key test of just how much macro matters to Bitcoin now as crypto traders remain caught up in ETF optimism and bets that the token could climb to $40,000 soon.
Beyond Bitcoin,
Ether
—the second-largest crypto—rose less than 1% to above $1,800. Smaller tokens or altcoins were weaker, with
Cardano
down 3% and
Polygon
slipping 2%. Memecoins were also in the red, with
Dogecoin
and
Shiba Inu
shedding 3% each.
Write to Jack Denton at jack.denton@barrons.com
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