Bitcoin teeters below $28,000 as investors eye fed rate decision
Bitcoin lost momentum on Monday, teetering above and below $28,000 as investors appeared poised to retreat ahead of the US Federal Reserve’s next interest rate decision on Wednesday.
The largest cryptocurrency by market capitalization recently traded at around $27,745, down about a percentage point from 24 hours ago. By early Monday (UTC), bitcoin had climbed above $28,400 just hours after the US Federal Reserve announced it had teamed up with five other major central banks to ensure a steady flow of the US dollar, a dominant reserve currency, in the global financial system.
“Faith in the fiat banking system is rapidly waning, and the only alternative, safe haven that is portable is bitcoin,” Stefan Rust, CEO of data aggregator Truflation, wrote in an email to CoinDesk. “The rapid rise in the price of bitcoin is a sign of fears that more trouble is lurking in the banking sector – especially since the fall of Credit Suisse.”
Rust added: “The bank runs we are seeing are also making it difficult to access gold, while fears of inflation and hyperinflation in some countries are driving a flight to BTC.”
In recent days, the price of bitcoin has rallied as the threat of a global banking meltdown receded and investor hopes rose for more dovish Fed policy, possibly even suspending its year-long string of rate hikes at the meeting starting Tuesday, albeit on a 25 basis. point increase seems most likely after last week’s only slightly improved inflation report.
“It’s probably most likely,” Tom Shaughnessy, co-founder of crypto research platform Delphi Digital, told CoinDesk TV’s “First Mover program.”
Sunday’s announcement that the Fed will increase the frequency of its dollar swap lines with the European Central Bank, the Bank of Japan, the Bank of England, the Bank of Canada and the Swiss National Bank from weekly to daily is aimed at curbing currency volatility and avoiding strains on the supply of credit to households and businesses worldwide, as CoinDesk Managing Editor Markets Asia Omkar Godbole reported, adding that “the increased frequency of swap lines has cleared the way for an unabated rise in risk assets, including bitcoin. The leading cryptocurrency by market capitalization is widely seen as a hedge against the banking system
Ether, the second-largest cryptocurrency by market capitalization, recently changed hands at around $1,731, down 3% from the same time on Sunday. Other cryptos in the top 25 by market cap were largely in the red, with APT, the token of tier 1 network Aptos, and MATIC, the native crypto of tier 2 platform Polygon, recently down by more than 8% and 6%, respectively. SOL, the symbol of the Solana blockchain rose slightly.
Delphi Digital’s Shaughnessy said the driving force behind bitcoin’s current surge and its potential sustainability were difficult to determine, although he noted that “this is the first time in history that we have a global banking crisis, and crypto validated to some extent and well. known that people can now seek an alternative and enter crypto.”
Laguna Labs’ Rust wrote that the Federal Open Market Committee (FOMC) announcement will likely determine bitcoin’s path forward.
“The only thing holding bitcoin back this week will be the FOMC meeting, with investors nervously awaiting the Fed’s next rate decision,” he wrote, noting that if the Fed scaled back its current policy, “markets will be very nervous and the will be a testing time for bitcoin.”
He added: “Will it continue to go in the opposite direction of global markets, or fall back in line? Absolutely, bitcoin maxis think the former.”
