Bitcoin and the broader cryptocurrency market had a great start to the year 2023 with the BTC price jumping 40% last month. The broader market added $280 billion to the crypto market in a month’s time.
However, as we start the new month of February, investors need to maintain cautious optimism going ahead. The big test ahead will be the upcoming Federal Reserve policy decision.
Last month witnessed a rally across asset classes such as crypto, stocks, and bonds over the expectations that the Fed would pivot to lower interest rate hikes and would eventually cut as inflation cools. Later today, February 1, the Federal Reserve is expected to announce a 25 basis points interest rate hike.
But Fed Chair Jerome Powell has already stressed that the policy will remain restrictive to damp prices. If so, it could pour cold water on the $250 billion runup in crypto last month.
Will Bitcoin Fight the Fed?
With Bitcoin already giving a solid runup at the start of 2023, we can’t expect the same momentum to sustain considering the overall market conditions. In his note, Vetle Lunde, senior analyst at Arcane Research, wrote:
The crypto “market is overly optimistic regarding a swift Fed pivot. Slowing momentum, strong technical resistance and expectations of a hawkish FOMC” point to a “poor February.”
Arcane Research’s further study on Bitcoin’s decision around the fed briefings, notes that the “trend of massive FOMC-induced volatility in BTC is receding”. However, some market analysts also believe that the worst of the crypto crisis following the collapse of the FTX could be behind us.
In addition to digital assets, stocks of crypto firms have also registered a strong rebound last month. Shares of US-based crypto exchange Coinbase (NASDAQ: COIN) jumped by 65%. Similarly, the index of Bitcoin-mining equities also jumped by 77% during the last month. A possibility is that we could be seeing some profit booking this month.
The post BTC Shows Signs of Over Optimism, Can Bitcoin Fight the Fed? appeared first on CoinGape.
