Bitcoin turned higher on Wednesday, reversing early losses, as investors took a pause from the recent pullback and weighed the Federal Reserve’s latest policy decision.
The price of the flagship cryptocurrency was last higher by 1.7% at $65,773.23, according to Coin Metrics. Earlier in the day, it fell as low as $60,793.60.
Cryptocurrencies strengthened at the end of the Federal Reserve’s two-day policy meeting, where the central bank held rates steady, as expected, and said it still sees multiple rate cuts this year. Like tech stocks, bitcoin sometimes benefits from low interest rates and improved market liquidity, which can lead to better sentiment and greater investment in growth assets.
“There has been an inverse relationship between rates and bitcoin price,” said Oppenheimer executive director Owen Lau. “When the Fed increased interest rates in 2022, it took out liquidity from the market, which impacted bitcoin and tech stocks. When the Fed cuts rates, it provides liquidity to the market, which should benefit risky assets such as bitcoin. Bitcoin is a bit of everything — sometimes it trades like a high beta tech stock.”
Bitcoin has declined 10% in the past week after hitting an all-time high of $73,797.68 last Thursday. It’s still up 53% for the year.
Ether was last higher by 1.2% at $3,379.43 on Wednesday, after topping $4,000 last week. Polygon’s matic token gained 1.5%, Solana was flat and dogecoin jumped 7%.
Crypto-linked stocks fared better throughout the day. Coinbase rose 11%. MicroStrategy added 9%, after tumbling about 20% earlier this week. In the mining sector, Iris Energy and CleanSpark climbed 26% and 22%, respectively. Marathon Digital advanced 16% and Riot Platforms, which JPMorgan upgraded Wednesday to overweight from neutral, increased 11%.
The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all closed at record highs after the Fed meeting wrapped up.
Recent weakness in bitcoin began as traders started taking profits after it had soared roughly 70% from the start of the year to its peak last Wednesday. Data from CryptoQuant shows a massive spike in short-term holders selling their bitcoin at a profit on March 12. That profit-taking led to a spike in long liquidations of leveraged bitcoin positions that continued through the start of this week, according to CoinGlass.
“We’ve seen 20%-30% pullbacks in previous bitcoin bull markets as a normal occurrence when things start heating up. And we definitely had many signs over the past week of things heating up quite a bit,” Vijay Ayyar, vice president of international markets and growth at crypto exchange CoinDCX, told CNBC.
If bitcoin were to fall below the $60,000 threshold, the cryptocurrency could weaken further to test the $50,000 to $52,000 level, Ayyar added, “which would be our line in the sand for this bull market to sustain [itself] going forward.”
