Bitcoin slightly rebounded after dipping over 15% from last week’s record as investors trimmed risks.
Wednesday’s Fed decision poses a risk for crypto asset prices, with concerns over a less investor-friendly stance due to strong U.S. economic data and sticky inflation, LMAX Group market strategist said.
Bitcoin (BTC) price rebounded to near $65,000 from its overnight lows on Tuesday, but the upcoming Federal Reserve meeting concluding on Wednesday is looming large over the crypto market to decide whether the correction is over.
After notching a series of fresh all-time highs over the past weeks, the largest crypto by market capitalization turned sharply lower from just shy of $74,000 on Thursday. It tumbled over 15% to below $63,000 by earlier Tuesday, dragging other digital assets lower.
The correction followed hotter-than-expected inflation readings in the U.S. last week, which could curb the central bank’s willingness to ease their monetary policy, further delaying interest rate cuts.
“The market unanimously expects rates to stay unchanged but will pay close attention to adjustments to the dot plot, as cuts may be delayed on the backdrop of persistently high inflation,” said Vetle Lunde, senior analyst at digital asset analytics firm K33 Research. The dot plot is the Fed committee members’ outlook on interest rates over the next year and offers investors a glimpse into policymakers’ expectations.
Bitcoin’s price decline was coupled with disappointing flows into the U.S.-listed bitcoin ETFs in the last few days, which was partly due to investors’ being wary of taking risks before the conclusion of the Federal Open Market Committee (FOMC) meeting, Lunde added.
Read more: Bitcoin Correction May Continue if ETF Inflows Disappoint in Next Few Days
A more hawkish message from the Fed could curb investors’ appetite for risk assets such as cryptocurrencies, weighing on prices and possibly elongating the correction.
“The Fed decision this week poses a risk, with concerns over a less investor-friendly policy stance due to strong U.S. economic data and inflation,” Joel Kruger, market strategist at LMAX Group, said in an emailed note. “While correlations between crypto and traditional assets have been low, a risk-off sentiment from the Fed decision could spill over into crypto.”
Recently, BTC was changing hands at $64,500, rebounding from below $63,000 but still down 3.5% over the past 24 hours. The broad-market CoinDesk 20 Index (CD20) declined almost 5% during the same time.
