Bitcoin traded higher from $1,000 near $39,000, after Federal Reserve officials said on Wednesday they expect to raise interest rates soon, while making no commitments ahead of its February meeting. March.
The central bank will start shrinking its balance sheet after the start of interest rate hikes.
The cryptocurrency is trading at around $38,309, up 3% in the past 24 hours.
Fears of a hawkish Fed led to broad selling of risky assets this month. BitcoinBTCUSD,
shed nearly half its value from its November all-time high, while the tech-heavy Nasdaq Composite COMP
posted an 11% loss in the past month.
Crypto “may have room to rally,” if the Fed meeting this week doesn’t surprise the market with a more hawkish stance, crypto asset manager Grayscale wrote in Wednesday notes, ahead of publication of the Fed’s statement.
“Using the consensus outlook for the Fed’s first rate hike in March – and assuming the previous cycle serves as a framework – this may imply that the crypto could be on the verge of bottoming ahead of the expected takeoff in two months,” the report wrote.
The report also noted that crypto markets now have “stronger fundamentals” than in previous market cycles as more crypto projects hit the market while attracting an increasing amount of money.
Jeff Dorman, chief investment officer of digital asset investment firm Arca, echoed that point. “There were no value investors in the earlier, longer-lasting bear markets, and many participants legitimately believed that digital assets might die and never come back. Capital is sitting on the sidelines today, just trying to figure out when to buy back,” Dorman wrote in Monday notes.
Still, technical analysts have warned of further near-term declines, highlighting $30,000 as the next level of technical and psychological support. “If we break below this level, we believe the $24,000 level serves as the next major level as it is Bitcoin’s on-chain cost basis,” wrote Clayton Gardner, chief investment officer of the investment management firm Titan, to MarketWatch in an email.
There’s more to watch, noted David Duong, director of institutional research at Coinbase, a Nasdaq-listed crypto exchange. “Even once we get the data from the Fed, we’ll still need to know what’s going on with inflation, whether inflation is heating up or not, because otherwise we’re going to go back into the same cycles of questioning. .”
Read more: Bitcoin’s Dead Cat Rebound? Here are the signs that may point to price lows, according to analysts