XM does not provide services to residents of the United States of America.

Bitcoin bounces back after dovish FOMC meeting - Crypto News



  • Bitcoin slid from record highs amid growing ETF outflows

  • But dovish Fed breathes life back into risky assets

  • Ethereum and smaller coins follow Bitcoin higher

Bitcoin pulls back due to stagnating ETF demand

Cryptocurrencies began this week where they left off, extending their losses after a series of US data had been underscoring the scenario that the Fed could clip some of its rate cuts projected for 2024. Many speculative traders might have seen this as the perfect opportunity for some profit taking, causing a deeper decline compared to what was happening in other risk-sensitive assets.

This dire sentiment was evident in the spot ETF trading volumes, with the 10 spot-Bitcoin ETFs recording the largest three-day outflow since their launch in early January. In general, the trading activity of spot ETFs has become the main lever in Bitcoin prices, while it also serves as a proxy for the overall sentiment in the crypto market.

Fed stops the bleeding

Bitcoin and most altcoins bounced back on Wednesday as the Fed struck a dovish tone at its latest meeting. Fed officials maintained their projections of three rate cuts in 2024 despite the persistent inflationary pressures, which could suggest that they are more focused on the growth outlook.

Risky assets cheered this development, with the S&P 500 surging to a fresh all-time high, dragging crypto assets higher. Bitcoin closed the day around 10% higher from its session low but remains well beneath its recent record peak of $73,800.

Taking a step back, the base of the exponential rallies we have seen in both cryptos and stocks was built under the assumption that the Fed will cut aggressively in 2024. Therefore, in the absence of any idiosyncratic developments, cryptos might be largely influenced by changes in the Fed’s interest rate trajectory, given that they are not backed by any other fundamentals.

Besides Bitcoin, Ethereum also rebounded strongly from its recent dip, which was caused by speculation that the spot-Ether ETFs will not be granted approval in May as markets had priced in. Moreover, Dogecoin and Litecoin also recorded significant gains due to Coinbase’s plan to offer futures contracts on them.

Levels to watch

BTCUSD has been undergoing a strong pullback from its all-time highs, dropping to as low as $60,760 on Wednesday. However, the king of cryptos managed to stage a solid comeback after the dovish FOMC meeting boosted risk sentiment.

If the recovery resumes, Bitcoin could challenge the $70,175 hurdle ahead of the record peak of $73,800.

On the flipside, bearish actions could send the price lower towards the $64,500 before the recent deflection point of $60,760 comes under scrutiny.

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.