Bitcoin, the world’s largest cryptocurrency, pared back its rally after reaching near $61,000 following expectations of a potential interest rate reduction by the Federal Reserve.
As of 8:50 a.m. in Singapore on Wednesday, Bitcoin was trading close to $60,000, a slight dip after climbing as much as 6.4% on Tuesday, marking its most significant intraday surge since August 8.
Bitcoin Rallies Up in Fed Rate Cut Expectations
The market’s anticipation of a 50 basis point rate decrease announcement from Fed policymakers was the driving force behind the recent price spike.
Additionally, traders had factored in the prospect of a quarter-point relaxation, with market-implied odds of a rate reduction of about 55%, Bloomberg reported. The demand for speculative assets like Bitcoin has increased due to the possibility of lower financing costs.
The head of Arbelos Markets, Shiliang Tang, noted that Bitcoin’s upward momentum is being fuelled by its growing linkage with traditional financial markets. “A combination of increasing correlation between crypto and traditional markets recently is driving the price of Bitcoin higher,” he stated.
According to Tang, the news from MicroStrategy Inc., which made intentions public on Monday, to offer convertible notes to buy additional Bitcoin, increased market optimism.
Bitcoin’s Price Action & Market Dominance
Despite the recent surge, Bitcoin has been trading within a relatively narrow range after reaching an all-time high of nearly $74,000 in March. Stephane Ouellette, CEO of FRNT Financial, noted that the cryptocurrency market remains thin, making it susceptible to sharp price movements. “It does not take incrementally much on either side to see a move like this,” Ouellette commented.
Bitcoin’s dominance level also reached 57.68% for the first time since April 2019, a significant milestone. Historically, when Bitcoin’s dominance hit such levels, it led to prolonged bullish trends. Bitcoin is currently trading at $60,399.32 and is up by almost 4% in the last 24 hours at press time.
As market sentiment remains optimistic and the Federal Reserve’s decisions unfold, Bitcoin’s trajectory could be shaped by how these external factors interact with its growing dominance in the cryptocurrency landscape.