- Investor confidence has been boosted by Bitcoin’s 43% gain in January.
- AI tokens like FET and AGIX have already been gaining traction over the past few weeks. Each of these digital assets has increased by over 100%.
- Interest rates were raised by the Federal Reserve by 25 basis points. This brings federal interest rates to a range of 4.50% to 4.75%. The move indicated that the central bank’s hawkish monetary policy was softening.
- The market is not fully pricing Powell’s annual meeting with David Rubenstein at the Economic Club of Washington (8 February), which could cause some disturbance.
- Without a recession and unemployment above 4% this year, it is very unlikely that the Fed will lower interest rates, supporting our belief that the market is sceptic about rate cuts this year.
The price recovery of Bitcoin has been slowed down by the strengthening of the dollar, but lower prices are likely to draw investors in BTC and other cryptocurrencies. The S&P 500 (SPX) index and Bitcoin are under pressure as a result of the United States Dollar Index’s (DXY) robust recovery. When Federal Reserve Chairman Jerome Powell spoke before the Economic Club of Washington on February 7, market participants were closely listening for any indications of potential rate increases. The Federal Reserve raised the rates by an additional 25 basis points. As a result, the current range for federal interest rates is 4.5% to 4.75%. The action demonstrated a shift in the hawkish monetary policy of the central bank. The 43% increase in Bitcoin prices in January, meanwhile, has helped small investors feel more optimistic. Traders typically buy the dips when the sentiment turns bullish because they believe the uptrend will continue. If a correction is on the horizon, dip buyers will search for the $19,000 to $21,000 support range, or even lower.
The crypto market is dominated by AI tokens:
AI tokens have performed exceptionally well in the market since the launch and popularity of Open AI’s ChatGPT. Despite the crypto market’s recent downturn, AI tokens have remained green in a sea of red. Nonetheless, this performance could be just getting started as institutional investors throw their hats into the ring with Artificial Intelligence technology. AI tokens such as FET and AGIX have already gained traction in recent weeks. These digital assets have more than doubled in value, rising from relative obscurity to become some of the best-performing tokens in the space. SingularityNET’s AGIX, FET from Fetch.ai and ALI from Artificial Liquid Intelligence are the Top 3 as per the marketcap on data aggregator website Coingecko. Other notable AI tokens have seen double-digit gains in the last day, including OCEAN, DBC, and SDAO.
The use of native AI (Artificial Intelligence) tokens from reputable AI projects is quickly gaining popularity. Any token related to AI appears destined to experience a significant uptick in value as AI products like ChatGPT gain traction from virtually every internet sector. ChatGPT and numerous other AI systems have demonstrated that the time for AI to become widely used is either already here or is very near. The $10 billion investment made by Microsoft (NASDAQ: MSFT) in ChatGPT suggested that AI applications might become more commonplace in the ensuing years.
Bitcoin Dominance:
Although Bitcoin dominance isn’t always the best indicator, we’re generally at a stage in the cycle where demand is spread across a number of alternative coins, and Bitcoin interest among the coins is close to the 2018 lows on the charts, which is suggestive of one of two things: either there’s still some room to fall below the 40% threshold or we’ve already reached bottom. Since prices will eventually trend upward again, now is not the time to distribute or reduce weightings; instead, increase your long-term holdings and weightings. Because of macroeconomic factors and ongoing inflation, Bitcoin has a tendency to increase in value when interest rates rise. The trends that have caused the price of Bitcoin to trend higher will inevitably apply to more fiat currency in relation to Bitcoin. Since there are so many sources of demand for Bitcoin and the network is still expanding, we anticipate that the underlying thesis of adoption will continue. Bitcoin supply growth is significantly slower than fiat supply growth.
Ethereum Price Analysis:
Ethereum is still trapped between the overhead resistance at $1,672 and $1,580. Trading in such a narrow range is unlikely to last for very long, and a breakout could occur soon. $1,766 and $1,800 will be the areas of interest if the bulls seize control and we gain momentum. However, the ETH/USDT pair may continue to decline and eventually reach $1,462 if the price crashes below $1,580. If the pair bounces off of this level, it will stay in the $1,462 to $1,580 range for a few days. This level might draw buyers.
Yesterday, Bitcoin came close to the short-term resistance area between $24,000 and $25,000, but the bulls were unable to capitalize on the momentum. Due to possible short-term traders’ temptation to book profits, the price has decreased to $22,700. Price bouncing off of $22,700 would indicate that bulls have turned the level into support. That might raise the possibility of a rally to $25,000 However, given the significant macroeconomic data being released this week, if bears manage to lower prices below $22,700 once more, the correction may deepen to or near the psychological support level of $20,000.
Concluding Thoughts:
The rate hike was widely anticipated by markets, with analysts pricing a 25 basis point hike at 98% and a 50 basis point hike at 2%. The announcement had little impact on major indices or the crypto market, with BTC only rising 0.07% immediately after the announcement. The Fed has raised interest rates for the eighth time since the beginning of 2022. In November 2021, the central bank outlined its plan to tighten monetary conditions in order to combat raging inflation; interest rates were at 0% at the time. However, the Fed’s hawkishness has been criticised by a number of organisations, including the United Nations, which warned in October that raising interest rates too quickly risked causing a global recession. The Fed finally slowed the pace of its rate hikes last month, raising rates by 50 basis points rather than 75. The decision made today is another step in that direction. Without a recession and unemployment above 4% this year, it is very unlikely that the Fed will lower interest rates, supporting our belief that the market is sceptic about rate cuts this year. We are a little more optimistic that it will not be as severe as a great recession or major, major recession. The fact that the Fed’s actions are having such a slow effect does not mean that they will not have a significant cumulative effect. We’re probably still a quarter or two away from seeing the full impact of the Fed’s actions on the economy.
