Bitcoin Reverses New Year Rally as Investors Monitor Fed and SEC
Bitcoin saw a reversal in its new year rally as investors considered the Federal Reserve’s policy outlook and awaited updates on the Securities and Exchange Commission’s (SEC) decision on a bitcoin exchange-traded fund (ETF).
The price of bitcoin dropped over 4% to $42,685.85, erasing most of its gains from the previous day when it reached its highest level since April 2022 at $45,913.30.
Ether also experienced a decline of over 6% to $2,221.27, while other coins such as Solana, XRP, litecoin, and dogecoin suffered steeper losses.
Uncertainty Surrounding SEC ETF Decision Worries Investors
Investors expressed concerns that the SEC might not approve a bitcoin ETF this year as anticipated by bitcoin enthusiasts.
This uncertainty caused some short-term traders to become jittery and unwind their long positions due to increasing leverage. The market volatility was triggered by fears of missing out on potential gains.
Bernstein Analyst Remains Bullish on Bitcoin
Bernstein analyst Gautam Chhugani dismissed worries about the ETF in a note, asserting that any price dips present buying opportunities for bitcoin and bitcoin miners. Chhugani expects the market to rebound significantly after the ETF’s approval, which is likely to occur at the end of the following week.
Darius Tabatabai, co-founder of decentralized exchange Vertex Protocol, believes that the crypto market has been overheated after seven months of continuous bitcoin price increases. He views the recent market correction as relatively healthy and necessary for stability.
Fed Warns of Potential Interest Rate Hikes
Richmond Federal Reserve President Thomas Barkin cautioned that while he predicts a soft landing for the economy, interest rate hikes are still on the table. The minutes of the Fed’s latest meeting also indicated that policymakers are prepared to maintain a restrictive stance on policy depending on inflation, making the future path of interest rates uncertain.
The recent price action in bitcoin is now being influenced by macroeconomic factors, including weakness in stocks, bonds, and gold, as well as strength in the dollar.
January Performance and Previous Year’s Growth
January has historically been a mixed month for bitcoin, with it ending positively in five out of the last 11 years.
Prior to the new year rally, bitcoin experienced a consolidation period for three weeks and ended December with a 12% increase. Overall, bitcoin more than doubled in value in 2023, soaring by 157%.
Hot Take: Bitcoin Faces Market Volatility Amid Regulatory Uncertainty
The price of bitcoin took a downturn as investors assessed the Federal Reserve’s policy outlook and anxiously awaited the SEC’s decision on a bitcoin ETF. This uncertainty surrounding the regulatory landscape triggered concerns among short-term traders, leading to a sell-off and increased market volatility. Despite this, some analysts remain bullish on bitcoin and view any price dips as buying opportunities. The recent correction is seen as healthy for market stability after months of consistent price increases. Additionally, warnings from the Fed about potential interest rate hikes further influenced market sentiment. Overall, January has historically been a mixed month for bitcoin, with its performance dependent on various macroeconomic factors.
By
By
By
By