Cryptocurrency rally comes to a screeching halt: market already looking ahead to Fed meeting

If yesterday, on Thursday, we wondered whether the rally in the cryptocurrency market could continue, today we have the answer: a resounding no. After a couple of days of very strong gains that pushed Bitcoin (BTC) to almost $21,000, the world's largest cryptoasset has accumulated losses of almost 3% in the last few hours and is struggling to maintain the $20,000 level. Ethereum (ETH), meanwhile, is down almost 4% and is trying to hold $1,500 after an unsuccessful attempt to break $1,600.

These losses have caused the market to lose the trillion-dollar total capitalization, a figure it has not reached for more than a month. At the moment, the total market capitalization of all cryptocurrencies is $975.88 billion, almost 3% less than yesterday.

Naeem Aslam, chief market analyst at AvaTrade, already warned yesterday to hold back hopes for an extension of the rally as "what we want to see is consistency in momentum and looking at the price action, it doesn't look like it's going to have that."

"It has run out of steam," wrote Edward Moya, senior market analyst at Oanda, on the cryptocurrency price rally. The expert believes this stagnation is due to the fact that "the appetite for risk struggles to find a solid base after the US economic data and the gains" of technological companies such as Apple, Alphabet (Google), Microsoft, Meta and other important businesses with a high technological component like Amazon.

"It looks like Bitcoin will consolidate ahead of the Fed's decision, but it could strengthen further if the dollar continues to weaken. If Wall Street becomes more concerned about the economic outlook, rates could fall further, which is great news for 'cryptos,'" he added.

It is worth noting that after the latest economic data and the Bank of Canada's surprise, CME's Fedwatch tool gives an 84% probability that the Fed will raise interest rates by 75 basis points when it was above 95% a few days ago. Looking ahead to December, it gives a 51.4% probability that the hike will be 0.5%, with 40.6% estimating a fifth consecutive 75 basis point hike and the remaining 8.1% betting on a 0.25 hike.

"Overall, it appears that macroeconomic headwinds for digital assets are easing," explained Julius Baer, "Much negative news seems to be discounted, especially if our general economic outlook that there is no recession in the US and inflation picks up materializes, as this should lead to a less hawkish Fed going forward."

That said, the experts warned that "upside risks to cryptocurrencies have not returned to favor," as investors "remain reluctant to return to the markets after this year's crisis." "Overall, we are increasingly confident that we are past the low point for cryptocurrencies, but we struggle to see triggers for a rapid price rebound," they stated, while noting that the benefits of 'The Merge' of ETH will not materialize until well into next year.

In other news, Core Scientific Inc, one of the largest BTC miners in the world, has indicated that it could run out of cash by the end of the year and declare bankruptcy, according to important US media such as 'CNBC' or 'Bloomberg'.

Elsewhere in the market, sharp drops of almost 6% in Cardano (ADA) and almost 4% in Solana (SOL) in the last 24 hours. Polygon (MATIC) is down 2.75% and Shiba inu plunges 5%. Dogecoin, meanwhile, is rebounding strongly in recent hours following the completion of Elon Musk's acquisition of Twitter.