Bitcoin jumps to $41000 while breaking out of trading range
The price of bitcoin increased by approximately 6% on Wednesday after the Federal Reserve hiked interest rates by half a point, the largest increase in roughly 20 years, as predicted.
Bitcoin started to rise in value ahead of the conclusion of the Federal Open Market Committee meeting. Many people predicted the half-point increase. Its rise intensified when Fed Chair Jerome Powell ruled out a 75-basis-point raise.
“The committee is not actively discussing a 75-basis-point rise,” Powell added. “I believe expectations are that inflation will begin to level off.”
During Powell’s afternoon speech, bitcoin reached a high of $40,002.75. Crypto assets increased in value throughout the market as a result.
“Any FOMC forecast that does not contain a 0.75 percent interest rate hike would be positive for both crypto and stocks,” said Nick Mancini, research director at crypto sentiment analytics platform Trade The Chain. “We think the market has priced in continuing rises of 0.25 percent to 0.50 percent in 2022.” This provides market clarity, which encourages positive price behavior.”
With inflation near 40-year highs, the market anticipated the most aggressive tightening timetable in the same length of time, according to Joe Orsini, director of research at Eaglebrook Advisors.
“These expectations create the stage for a ‘not all that horrible’ surge if the Fed turns out to be less aggressive than expected,” he told CNBC. “The first indication of this came today, when Powell ruled out a 75-basis-point raise – this triggered the bounce we’re witnessing this afternoon.”
Bitcoin has failed to regain its all-time high of about $68,000 from November, as risk assets have been battered all year by increasing inflation, the Ukraine crisis, and tighter Fed policy. However, the cryptocurrency’s famed volatility has decreased in the short term — considerably below the shares of major digital darlings like as Netflix, PayPal, and Meta Platforms — as it has traded in a narrow range between $38,000 and $42,000 since the beginning of 2022.
“In terms of seasonality, BTC considers May to be a relative success. Bitcoin has closed the month up seven times and down four times in the last 11 years “According to Alex Kuptsikevich, senior market analyst at FxPro.
Although forecasting the future performance of any asset is hard, Kuptsikevich believes Bitcoin will trade between $32,000 and $48,000 by the end of this month. Kuptsikevich said that he made this estimate based on the cryptocurrency’s average surge of 27% and average decrease of 16% in May, for a total gain of roughly 11%. According to CoinGecko statistics, Bitcoin was worth roughly $38,528 as of Monday evening.
However, other experts are skeptical that May will be as fruitful for Bitcoin as it has been in the past, given the cryptocurrency’s previous propensity to track the stock market, rising interest rates, the broader macro climate, and a general reluctance to riskier investments.
“If there are evidence that inflation is peaking,” Orsini noted, “the Fed has some space to be patient.” “A less aggressive tightening strategy would be positive for bitcoin, ether, and digital assets, which continue to outperform conventional stocks.”
The bitcoin surge coincided with a rally in the wider stock market. Finally, the S&P 500 climbed 2.9 percent, while the Nasdaq rose more than 3 percent. Over 932 points were added to the Dow Jones Industrial Average.
Bitcoin, which continues to dominate the price activity in the cryptocurrency market, is also closely associated with stock market movements.
“The linkages between digital assets and conventional markets remain considerable,” said Josh Olszewicz, director of research at digital asset investment firm Valkyrie Funds. “The DXY and 10-year yield both reversed significantly intraday, while the S&P 500 and Nasdaq enjoyed a minor positive boost, with bitcoin up roughly 3.5 percent from intraday lows.”