Bitcoin tests $24,000 while focused on the Fed; will there be a correction?

Cryptocurrencies start the week on a good note. Bitcoin (BTC) is above $23,500, after rising 1.7% in the last 24 hours and touching $24,000, reaching its highest level since August of last year. For its part, Ethereum (ETH) soars 1.9% and remains at $1,600.

The Federal Reserve (Fed) meeting occupies virtually all of the market's attention. While there has been some mixed signals, most of the macroeconomic readings released in the last month, especially the inflation data and the December personal consumption deflator (PCE), give the market hope that the central bank will raise benchmark interest rates by only 25 basis points. According to CME's FedWatch tool, there is a 99% probability that this will be the case.

"The more modest increase is part of the reason that many crypto prices have increased. It’s seen as a positive economic sign and is now being baked into the demand for Bitcoin. It has been positively correlated with the equities markets in recent years and the lower rate is a bullish sign for the stock market," stated Joe DiPasquale, CEO of BitBull Capital.

Meanwhile, Neil Wilson, chief markets analyst at Markets.com, believes that Chairman Jerome Powell is likely to report a 25 basis point interest rate hike, but cautions that "it's not the same as a stop or a pivot." "My belief is the market is mispricing the terminal rate and misjudging how long the Fed will keep them there before it cuts. Markets are also pricing in cuts later this year. But Fed officials, by way of the dot plot, think the terminal rate will be some way above 5% and stay there for all of 2023," warned Wilson, who believes that "even they are underestimating the magnitude of the problem and a 6% level is eminently possible."

In this regard, Wilson and Naeem Aslam, chief market analyst at AvaTrade, point to the latest US GDP data, which grew more than expected despite clear signs of a slowdown. "This has given the Fed confidence that if it wants to increase the interest rate aggressively like before---an interest rate hike of more than 50 basis points, then the Fed can certainly do that," stressed Aslam, who believes that another key question will be whether the US economy will experience a soft landing. On this note, Friday's non-farm payrolls data will be key to what to expect from the U.S. economy in the near future.

DiPasquale also stressed that current market conditions remain conducive to a downward turn after a few weeks in which optimism boosted 'crypto' market prices. "Investors might choose to take profits now given the downside potential after several weeks of gains, and the possibility that Bitcoin may test $20k again in the near future," he added.

News also continues to come in on the judicial investigation into the FTX collapse. The latest is that federal prosecutors have asked the bankruptcy court hearing the case to prohibit Sam Bankman-Fried, founder and former CEO of the exchange, from communicating with former and current employees of the company and investment firm Alameda Research. According to prosecutors, SBF allegedly contacted a former employee in an attempt to "influence potential testimony."

In other market news, Solana (SOL) leads the increases with a rise of more than 4.5% and is above $25. Meanwhile, Cardano (ADA) gains 0.6% and Ripple (XRP) trades almost flat. Dogecoin (DOGE), on the other hand, drops more than 0.5%.