Bitcoin prices rose on Thursday after the Federal Reserve struck a less hawkish tone than markets expected, with broader cryptocurrencies also advancing as the dollar weakened and traders bet on no more interest rate hikes.
The world’s largest cryptocurrency by market capitalization rose nearly 4 percent to $35,808, its highest level since May 2022. The world’s second-largest cryptocurrency, Ethereum, rose 3% to $1,866.19 – a near three-month high.
The crypto market was largely boosted by a weaker dollar and falling yields after the Federal Reserve kept interest rates steady on Wednesday, as widely expected. The Dollar Index fell more than 0.5% in Asian trading on Thursday.
Fed Chairman Jerome Powell appeared to strike a less hawkish tone on future rate hikes. While he still left the door open for one more rate hike this year, Powell also acknowledged that monetary conditions have tightened significantly in recent months. Markets took this as a signal that the Fed may not raise rates any further and could potentially begin cutting rates by mid-2024.
This notion caused traders to move out of the dollar and into risk assets, which benefited cryptocurrencies.
Bitcoin topped $35,000 for the first time since May 2022. A series of high-profile bankruptcies in the crypto market – including Terra, Three Arrows Capital, and most notably FTX – had triggered deep declines in crypto prices last year. The world’s largest crypto token had fallen to as low as $15,000 in late 2022.
The token has been on a tear in recent weeks, benefiting greatly from speculation that an exchange-traded fund that directly tracks the price of bitcoin will soon be approved in U.S. markets.
Applications from Grayscale, Ark Ventures and, most notably, the world’s No. 1 asset manager BlackRock Inc (NYSE:BLK) are under review by the Securities and Exchange Commission.
However, much of these gains also appeared to be driven by a drastic drop in liquidity as broader retail interest in the crypto space continued to decline. Bitcoin’s trading volumes had fallen sharply from the lifetime highs seen in 2021.
On the technical front, bitcoin also appeared to be on the verge of retracing much of last year’s bear market decline.
“Just a few hundred dollars higher at $36k is the 38.2% fibo retracement of the entire bear market decline from $69k to $15.5k,” said Tony Sycamore, market analyst at IG, in a tweet.
Crypto markets were also awaiting quarterly results from major exchange Coinbase Global Inc (NASDAQ:COIN), which are due later on Thursday.
