Bitcoin regains optimism on expectations of a more dovish Fed

Cryptocurrencies continue to advance. Bitcoin (BTC) resumes its rally and gains around 0.8% in the last 24 hours, and is now above $26,800. For its part, Ethereum (ETH) rises 0.3% and seems to be consolidating at the $1,600 level.

After the latest rises, which took it back above $27,000, the reigning cryptocurrency is at the level lost on 1 September, when the Securities and Exchange Commission (SEC) decided to extend the deadline for deciding on Bitcoin spot ETFs. Some experts point out that a large part of the blame for this rally may lie with the Federal Reserve (Fed), which on Wednesday 20 September will decide what the next step in its monetary policy will be, although everything points to a pause (99% probability according to the CME's FedWatch tool.)

In this sense, the consensus seems to be quite clear that the Fed will not raise interest rates any further this year: for November, they give a 69% probability of another pause (+13% compared to last week) and for December, analysts believe that there is a 58% probability that rates will remain as they are right now (+3% compared to last week.)

"If further hikes are seen, this may well lean on BTC near-term as USD trades higher. However, if the bank refrains from signalling further hikes this could be just the catalyst BTC needs for a fresh upside break," explained James Harte, market analyst at TickMill Group.

Still, that doesn't mean this meeting isn´t interesting, as the market is focusing on the central bank's forecasts. The Fed has stressed time and again that every decision is possible until the very last moment. However, despite repeated warnings from officials and the latest mixed macroeconomic data, the consensus is clear that there will be no hike today and they are now debating what the central bank's statement will deliver.

At Bank of America they expect "the average forecast for the policy rate in 2023 to show an increase of more than 25 basis points, to a terminal rate of 5.5-5.75%." Other experts, however, believe that the Fed will start cutting interest rates between the first and second quarter of 2024.

Moreover, the latest Bitcoin network activity data show that the leading cryptocurrency seems to have regained the confidence of investors. According to Glassnode, the number of new users of the Bitcoin network reflects the largest influx of new users in the last five months. The market also seems to believe that the sale of FTX assets will not be as damaging as feared.

From a technical point of view, Javier Molina, senior market analyst at eToro, commented that, after testing the $25,000 support, the current rally "does not maintain the strength to think higher." "We would need to see prices above $28,000 to believe that the short-term rebound is valid. For the moment, the $26,000 level seems to be the initial reference point", he explained.

"Below, key support at $24,800-$25,000, which, unless the stock markets suffer a severe adjustment of levels, we do not think that there is enough strength right now to lose this important level. If we are wrong and the bearish move pushes prices below $24,800, the target is $24,000 first and $22,000 as the next support level. However, if prices hold and start to recover, the key is to break above $28,000 first and the wall remains at $31,000. We need to be patient at these levels," he added.

In other market news, altcoins are faring somewhat worse, although Ripple (XRP) rises 2.4%, Cardano (ADA) soars 1.4%, Toncoin (TON) gains 3.8% and Solana (SOL) rises 3.5%.