For the first time in more than a month, bitcoin crossed the $23,000 mark after the Fed signaled a less aggressive rate hike than expected.
During the past 24 hours, the world's largest cryptocurrency has soared as high as $23,800, an 8% increase and a level not seen since mid-June. Coin Metrics data shows it was last trading at $23,330.80.
At its next rate-setting meeting, the Fed may take softer action, providing traders with comfort. Stocks and cryptocurrency have been heavily impacted by U.S. central bank tightening monetary policy.
“This isn’t necessarily the end of the crypto bear market, but a relief rally for Bitcoin is long overdue,” said Antoni Trenchev, CEO of crypto lender Nexo.
“Bitcoin is beginning to find its feet after a shaky month, and the next week will be telling,” Trenchev said.
It is anticipated that the Federal Reserve will raise rates again at its next policy meeting, but economists expect a less aggressive increase of 75 basis points instead of 100.
Historically, cryptocurrency has been promoted as an uncorrelated source of value. When the Fed began raising interest rates and traders fled equities, that thesis failed to materialize as institutional capital poured into digital assets.
According to Yuya Hasegawa, crypto market analyst at Japanese crypto exchange Bitbank, a rally above $22,700 indicates that the cryptocurrency has recovered its 200-week moving average.
“The market needs a little more assurance for deceleration in the pace of rate hike by the Fed,” he said. “Nevertheless, a short-term outlook for bitcoin is bullish and it could go as high as around $29k this week.”
A few large crypto firms have experienced liquidity issues, which caused an intense market contagion. Meanwhile, traders are betting that the worst of the problem will be over.
Recently, a number of notable ventures have collapsed, causing a ripple effect that has made digital currencies increasingly vulnerable to selling pressure. After Terra's price plunged to near-zero in May, Celsius, Three Arrows Capital, and Voyager ultimately went bankrupt, setting off a chain of events leading to their demise.