The Cryptocurrency Market Dips Ahead of Fed’s Meeting

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  • Bitcoin is on track to have its second-best January in the last ten years with a YTD gain of over 40%.
  • Amid weak interest rates and a revival in demand for long-term growth assets, cryptocurrencies have surged greatly.
  • APT is leading the altcoin group in terms of gains, up 35% this week. It has gone up almost 400% since the end of December when it hit its lowest point.
  • The ratio of ETH to BTC is down 5% so far this year, which means that Bitcoin has done better than Ethereum.
  • This week, the Federal Reserve’s Open Market Committee (FOMC) will likely hike rates by 25 basis points instead of their previous aggressive 50 and 75 bps.
  • One of the Federal Reserve’s inflation metrics, the PCE, indicated improvement last week. Since October 2021, the Personal Consumption Expenditures (PCE) inflation rate has increased by an average of 4.4% from the previous year.

Bitcoin is up more than 40 percent year-to-date and is on track for its second-best January in the past few years. While BTC is still trading below its highs of $24.5K from 2022, the current relief rally has outpaced all others over the past year. The recovery of the crypto market as a whole coincides with a positive shift in risk sentiment as U.S. inflation showed convincing signs of easing in recent months. Over the past week, BTC’s correlation with the S&P 500 has plummeted slightly, falling to 0.69 from 0.89. The idea that bitcoin trades like a high-beta tech stock is supported by the correlation between it and the tech-heavy Nasdaq Composite, which is still very high at 0.89.


Last week’s top performers:

Over the course of the past week, the tokens that have performed the best are DYDX, MINA, APT, FTM, and DASH. Each of these tokens has increased by more than 15%. Decentralized derivatives exchange dYdX announced in a blog post on Wednesday that it would postpone the unlock of its native DYDX token to investors until the fourth quarter. Following the release of its report, the token’s price increased by as much as 21%. Decentralized derivatives exchange dYdX announced in a blog post on Wednesday that it would postpone the release of its native DYDX token to investors until the fourth quarter. Following the release of its report, the token’s price increased by as much as 21%.

APT has dominated for the entire month, showing a staggering increase of 400% over the previous 30 days. Confirmation Proposal for Aptos Multichain Farm Emission, a new proposal that was just presented and if approved, would solidify the team’s intentions to expand upon the initial deployment. The demand for tokens built on Aptos that are non-fungible is also at an all-time high. Recently, the volumes of several NFT collections have increased by a factor of three or four on Topaz, one of the more well-known marketplaces.


Bitcoin Dominance:

The dominance of Bitcoin over other cryptocurrencies is also increasing. In November, the indicator had dropped to 39%, but as of right now, it has risen to over 44% for the first time since November 8. In the last 24 hours, Bitcoin started another leg up, reaching a new five-month high at just under $24,000. Since the altcoins are marginally losing value on a daily basis, BTC’s market share has risen to over 44.5% last week. Bullish movements occurred in Ethereum and bitcoin over the last few days. BTC price outperformed ETH, preventing ETH/BTC from maintaining its positive trend.


Bitcoin Price Analysis:

When bitcoin fell below $20,500 less than two weeks ago, it appeared that the 2023 rally had come to a halt. However, the asset quickly recovered its losses and went on to record new gains in the days that followed.
The end of that week was especially impressive, with BTC rising from $21,000 to over $23,000. Last week’s price fluctuations were much lower, and BTC stayed mostly around $23,000, with the exception of a spike to $23,800 on Wednesday last week. Yesterday morning, Bitcoin came close to $24,000 for the first time since mid-August of last year.


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:

As the Federal Reserve’s Open Market Committee (FOMC) gets closer to its rate-hiking cycle, they will probably only raise rates by another 25 basis points instead of the 50 and 75 basis points they did in the past. In order to stop inflation from getting out of hand, the Federal Reserve won’t say that the tightening cycle is over just yet. The Fed rate is getting close to its peak, but the FOMC is not likely to say that the tightening cycle is over just yet. Prices aren’t moving as much, which suggests that investors are still wary of riskier assets. This is because there are often mixed signals about economic growth and inflation, such as this week’s unexpectedly small increase in the gross domestic product (GDP) and drop in jobless claims. It seems that cryptocurrency assets have done well since 2023. The market is already on its way to getting better. From the start of January until now, the value of all assets in the space as a whole has gone up by about 33%. At press time on Monday, the total value of the cryptocurrency market around the world was more than $1 trillion.

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