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Bitcoin traded up more than $1,000 near $39,000, after the Federal Reserve officials said Wednesday they expect to raise interest rates soon, while making no no commitment before its March meeting.
The central bank will begin shrinking its balance sheet after interest rate hikes start.
The cryptocurrency is trading at around $38,309, up 3% over the past 24 hours.
Fears of a hawkish Fed have led to broad sell-offs among risky assets this month. Bitcoin
BTCUSD,
has lost almost half of its value from its record high in November, while the tech-heavy Nasdaq Composite
COMP,
logged a 11% loss over the past month.
Crypto “could have room to rally,” if the Fed meeting this week does not surprise the market with a more hawkish stance, crypto asset manager Grayscale wrote in Wednesday notes, before the Fed statement was released.
“Using the consensus outlook for the first Fed rate hike in March— and assuming the prior cycle as a framework— it may imply crypto could be close to finding a bottom before the expected lift off in two months,” the report wrote.
The report also noted that the crypto markets now have “stronger fundamentals” than during previous market cycles, as more crypto projects have come into the market while attracting an increasing amount of money.
Jeff Dorman, chief investment officer at digital asset investment firm Arca echoed the point. “There were no value investors in prior, longer-lasting bear markets, and many participants legitimately thought digital assets might die and never come back. Today, capital is sitting on the sidelines just trying to figure out when to buy back in,” Dorman wrote in Monday notes.
Still, technical analysts cautioned about further downside in the near term, highlighting $30,000 as the next technical and psychological support level. “If we break below this, we think the $24K level serves as the next major level as it is Bitcoin’s on-chain cost basis,” Clayton Gardner, chief investment officer at investment management firm Titan, wrote to MarketWatch in an email.
There’s more to watch, noted David Duong, director of institutional research at Nasdaq-listed crypto exchange Coinbase. “Even once we get the Fed data, we’ll still need to know what’s going on with inflation, whether inflation is heating or not, because otherwise, we’re going to get back into the same cycles of questioning.”
Read more: Bitcoin’s dead-cat bounce? Here are the signs that may indicate price bottoms, analysts say
