Bitcoin bounces back after dovish FOMC meeting - Crypto News
Bitcoin slid from record highs amid growing ETF outflows
But dovish Fed breathes life back into risky assets
Ethereum and smaller coins follow Bitcoin higher
Bitcoin pulls back due to stagnating ETF demand
Cryptocurrencies began this week where they left off, extending their losses after a series of US data had been underscoring the scenario that the Fed could clip some of its rate cuts projected for 2024. Many speculative traders might have seen this as the perfect opportunity for some profit taking, causing a deeper decline compared to what was happening in other risk-sensitive assets.
This dire sentiment was evident in the spot ETF trading volumes, with the 10 spot-Bitcoin ETFs recording the largest three-day outflow since their launch in early January. In general, the trading activity of spot ETFs has become the main lever in Bitcoin prices, while it also serves as a proxy for the overall sentiment in the crypto market.
Fed stops the bleeding
Bitcoin and most altcoins bounced back on Wednesday as the Fed struck a dovish tone at its latest meeting. Fed officials maintained their projections of three rate cuts in 2024 despite the persistent inflationary pressures, which could suggest that they are more focused on the growth outlook.
Risky assets cheered this development, with the S&P 500 surging to a fresh all-time high, dragging crypto assets higher. Bitcoin closed the day around 10% higher from its session low but remains well beneath its recent record peak of $73,800.
Taking a step back, the base of the exponential rallies we have seen in both cryptos and stocks was built under the assumption that the Fed will cut aggressively in 2024. Therefore, in the absence of any idiosyncratic developments, cryptos might be largely influenced by changes in the Fed’s interest rate trajectory, given that they are not backed by any other fundamentals.
Besides Bitcoin, Ethereum also rebounded strongly from its recent dip, which was caused by speculation that the spot-Ether ETFs will not be granted approval in May as markets had priced in. Moreover, Dogecoin and Litecoin also recorded significant gains due to Coinbase’s plan to offer futures contracts on them.
Levels to watch
BTCUSD has been undergoing a strong pullback from its all-time highs, dropping to as low as $60,760 on Wednesday. However, the king of cryptos managed to stage a solid comeback after the dovish FOMC meeting boosted risk sentiment.
If the recovery resumes, Bitcoin could challenge the $70,175 hurdle ahead of the record peak of $73,800.
On the flipside, bearish actions could send the price lower towards the $64,500 before the recent deflection point of $60,760 comes under scrutiny.
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