Bitcoin Value Dips Amidst Uncertainty; Investors Await Federal Reserve's Decision
Summary:
Following a 12.5% drop in Bitcoin's (BTC) value between March 14th and 17th, a significant surge in buying activity occurred around the $65,000 mark. However, market uncertainty lingers about whether BTC can exceed its $73,755 all-time high. Investors are awaiting the outcomes of the U.S. Federal Reserve's monetary policy meeting and potential implications on Bitcoin's future. Market speculation suggests a potential Bitcoin bull run in 2024, contingent on a shift in the Fed's monetary policy. Despite recent events, continued demand for cryptocurrencies in China signifies no signs of a bearish or fearful market sentiment.
Following a value decrease of 12.5% that took the price of Bitcoin (BTC) down to $64,545 between March 14th and 17th, the cryptocurrency saw a surge of purchases when it neared the $65,000 mark. As a result, speculation is rife among investors about whether BTC can exceed its highest recorded price of $73,755.
The state of play will become clearer after the U.S. Federal Reserve's (Fed) monetary policy meeting slated for March 20. Investors are reserving their decisions to invest more in cryptocurrencies until then, despite the prevalent belief that there will be no change in interest rates. The market's attention is not just vested in the short-term approach, but also the confidence of the Fed in the steady progression of the economy.
Bitcoin investors are also wary about when the Fed will stop its reduction of its $7.5 trillion balance sheet. Broadly speaking, an expansive Fed monetary policy speaks to more money flowing freely, which typically benefits risk-related assets.
U.S. Base Money, used as an indicator of currency and reserves in the banking system, influences the state of Bitcoin's health. If interest rates are set high, this generally curbs businesses' appetite for growth and borrowing, assisting in curbing inflation.
Some market observers anticipate a Bitcoin bull run in 2024, contingent on a monetary policy change from contractionary to expansive at the Fed. Contributing factors could be a dip in inflation to less than 3% or the warning signs of economic deceleration. If interest rates remain high for a continued period, the chances of an explosive increase in Bitcoin values shrink.
The unease from an excessive leveraging among Bitcoin investors, fingers the record high open interest in Bitcoin futures in March, escalating from $22.2 billion on Feb. 25 to $35.5 billion on March 14 as a prime suspect.
In contrast, Bitcoin's funding rate indicates that there is no over-demand for short positions, meaning that investors are not betting on Bitcoin prices falling below $65,000. To accurately gauge the market's mood, the decrease in leveraged long position needs to be juxtaposed against the demand for stablecoins in China, a barometer of retail investors' movement in the crypto market.
The USDC premium is a device that measures the differing values of the USD Coin in peer-to-peer transactions and the official U.S. dollar rate. Throughout the past week, this premium has consistently exceeded 3%, reflecting a rate higher than its typically pegged value and a continued demand for cryptocurrencies in China, underlining a positive Bitcoin funding rate favoring long positions and no indication of a bearish or fearful market sentiment.
Published At
3/18/2024 10:45:00 PM
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