Bitcoin and cryptocurrencies cautiously bounce after Fed rates hike
Bitcoin and altcoins maintain the short-term rebound triggered on Wednesday after a rate decision by the US Federal Reserve (Fed) that the market decided to interpret as not very aggressive. The 75 basis point increase, the largest since 1994 was discounted by the market, so investors have clung to the promise that this type of action will not be commonplace, which was proffered by the chairman of the agency, Jerome Powell, and has been carried away by the appetite for risk. However, experts indicate that caution prevails.
Despite rises of around 7% and 11% for Bitcoin and Ethereum and the rally of other tokens such as Solana, which soars 20% in the last 24 hours or Cardano, that is up 12%, the market capitalization remains below the trillion dollar mark ($950 billion). Moreover, Satoshi Nakamoto's creation touched 18-month lows at the $20,000 level, a price level that while many experts indicate is a market floor for the digital asset, it is highly exposed and vulnerable.
As for Ethereum, the rebound has taken it back to the gates of $1,200. However, the outlook is also very weak as the one-and-a-half year lows have been touched at $1,025, according to CoinMarketCap, a price that exposes crypto funds such as 3 Arrows Capital. The liquidity crisis in the crypto space initiated this week by digital currency lending and trading platform Celsius, could be systemic and drag down other companies, specifically funds like the aforementioned. Other industry giants, such as Coinbase, have already announced layoffs.
However, the short-term relief is undeniable, as the crypto market rode the stock market rally in the heat of the Fed. All in all, Vitcoin "has received a minor helping of love and I find it hard to imagine a scenario where this changes," noted Craig Erlam, analyst at Oanda.
"The appetite for risk has faded and the days of ultra-low rates are behind us. There is not the same speculative mood that existed when Bitcoin was exploding to the upside," he added. "There may still be a belief that Bitcoin can thrive in the future, but right now it offers nothing beyond speculative rallies, so it's going to continue to face difficulties," he continued. "Especially when we see headlines like Celsius and Binance. What once looked like solid support below $20,000 suddenly looks very shaky."
"As long as support continues to hold, we still have some hope for fewer losses going forward," added Craig Erlam, head of analysis at Avatrade. That said, "speculators believe that the $20,000 barrier is no longer a reliable market floor and it is likely that the price can continue to fall," he adds, so "we are likely to see further declines to near the $15,000 price level."
Mind you, the expert warned that "it is very important to keep in mind that both Ethereum and Bitcoin prices are extremely oversold on the daily and weekly time frame according to the RSI, which means that bargain hunters could soon jump into the ring."