Bitcoin saw a reversal in its trajectory on Wednesday, bouncing back from early declines, as investors paused amidst the recent market pullback and contemplated the Federal Reserve’s latest policy stance.
“The price of the flagship cryptocurrency was last higher by 1.7% at $65,773.23,” reported Coin Metrics. Earlier in the session, it had dipped to $60,793.60.
Following the results, of the Federal Reserve’s two-day policy meeting, cryptocurrencies experienced a resurgence. As widely anticipated, the central bank maintained interest rates at their current levels and reiterated its outlook for multiple rate cuts throughout the year.
This decision often impacts various asset classes, including bitcoin, which sometimes mirrors the behavior of tech stocks.
The rationale lies in the correlation between low-interest rates, enhanced market liquidity, improved investor sentiment, and increased investment in growth-oriented assets.
“There has been an inverse relationship between rates and bitcoin price,” noted Oppenheimer executive director Owen Lau.
“When the Fed increased interest rates in 2022, it took out liquidity from the market, which impacted bitcoin and tech stocks. When the Fed cuts rates, it provides liquidity to the market, which should benefit risky assets such as bitcoin. Bitcoin is a bit of everything — sometimes it trades like a high beta tech stock.”
Despite reaching an all-time high of $73,797.68 last Thursday, Bitcoin has experienced a 10% decline over the past week. However, it remains up by 53% for the year.
Ether saw a modest increase of 1.2% to $3,379.43 on Wednesday, following its recent surge above $4,000 last week. Meanwhile, Polygon’s matic token experienced a gain of 1.5%, Solana remained steady, and Dogecoin surged by 7%.
Crypto-related stocks performed well throughout the trading day. Coinbase recorded an 11% increase, while MicroStrategy rebounded with a 9% gain after a roughly 20% decline earlier in the week.
In the mining sector, Iris Energy and CleanSpark saw significant climbs of 26% and 22%, respectively. Marathon Digital also advanced by 16%, and Riot Platforms, which received an upgrade from JPMorgan to overweight from neutral on Wednesday, saw an 11% increase.
The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all achieved record highs following the results of the Fed meeting.
The recent downturn in bitcoin began as traders began cashing in their profits, following its meteoric rise of approximately 70% since the beginning of the year to its peak last Wednesday.
Data from CryptoQuant indicates a significant surge in short-term holders selling their Bitcoin for profit on March 12. This profit-taking triggered a surge in long liquidations of leveraged bitcoin positions, which persisted into the early days of this week, as reported by CoinGlass.
“We’ve seen 20%-30% pullbacks in previous bitcoin bull markets as a normal occurrence when things start heating up. And we had many signs over the past week of things heating up quite a bit,” remarked Vijay Ayyar, vice president of international markets and growth at crypto exchange CoinDCX, in an interview with CNBC.
Should bitcoin dip below the $60,000 mark, Ayyar suggested that the cryptocurrency might further weaken, possibly testing the $50,000 to $52,000 range. “which would be our line in the sand for this bull market to sustain [itself] going forward.
