On Wednesday, February 15, the price of the largest cryptocurrency, Bitcoin, surged by 12%, nearing the $25,000 mark, causing excitement among crypto enthusiasts about a potential rally. Nevertheless, macro indicators are indicating concerns, and the Federal Reserve's hawkish rhetoric is dampening the mood. In the past 24 hours, Bitcoin's price has dropped over 4%, currently standing at $23,797 with a market capitalization of $459 billion. Additionally, several leading alternative cryptocurrencies have also experienced a setback.
Investors are uncertain about Bitcoin's future trajectory following a recent price increase. However, on-chain indicators suggest that there is no need to worry yet. Ali Martinez, a popular market analyst, has pointed out that data from IntoTheBlock shows that Bitcoin has established a crucial support level between $21,700 and $23,700. Over 1.60 million addresses have purchased more than 1.32 million BTC within this range. If this support level can hold, the next significant resistance level is at $27,000.
Bloomberg's senior commodity strategist Michael McGlone discusses why Bitcoin (BTC) has gained 50% since the beginning of 2023. “Bitcoin hit the greatest discount versus its 200-week moving average at the end of 2022,” he said. This is a major cause for the 1Q drop, although the global economic tide remains adverse.
Bitcoin and Equity Markets
The Bitcoin price drop today coincides with a correction in the top three Wall Street indices on Thursday. Bitcoin's heavily connected index, the Nasdaq Composite (INDEXNASDAQ:.IXIC), fell 1.78% to 11,855.
Fed officials are suggesting bigger rate hikes in the forthcoming FOMC meetings in attempt to curb stick inflation. This is likely to reduce interest in risk assets such as Bitcoin.
In a report earlier this week, Goldman Sachs highlighted that “the fight against high inflation is still ongoing and there still remains more work for the Fed that has to be done”. It anticipates that growth stocks will encounter greater hurdles in the future.
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