The Federal Reserve's interest rate increase slowed down, and Bitcoin, the world's largest Cryptocurrency, rose sharply in response.On February 2nd, Beijing time, after the Federal Reserve announced a 25 basis point interest rate hike, the price of Bitcoin quickly climbed to over $24000 per coin
The Federal Reserve's interest rate increase slowed down, and Bitcoin, the world's largest Cryptocurrency, rose sharply in response.
On February 2nd, Beijing time, after the Federal Reserve announced a 25 basis point interest rate hike, the price of Bitcoin quickly climbed to over $24000 per coin. This is the first time the Federal Reserve has returned to a regular rate hike of 25 basis points since initiating its rate hike cycle last year. The market believes that the Fed's interest rate hike is nearing its end.
The Federal Reserve's interest rate hike has slowed down, and Bitcoin has surged. Image from CoinMarketCap
In fact, the cryptocurrency market has been rebounding for some time, and January this year was Bitcoin's best performing month since 2021. According to CoinMarketCap data, since January 1, the total cryptocurrency MarketCap has increased by more than 37%, and the price of Bitcoin has increased by more than 43%.
The total market value trend of Cryptocurrency in 2023. Image from CoinMarketCap
Why rebound
Yu Jianing, Executive Director of the Yuan Cosmos Industry Committee of the China Mobile Communications Federation, said that in fact, the 25 basis points of interest rate increase announced by the Federal Reserve had been digested in advance by the market. The real increase was due to the fact that the attitude of the Federal Reserve towards inflation had become dove after the meeting. This provides more possibilities for the Federal Reserve to relax its tight monetary policy in the future and drive the market up.
Bloomberg also analyzed that Cryptocurrency, stocks and bonds rose sharply in 2023, mainly because the market expected that the Federal Reserve would turn to slow interest rate hikes and eventually cut interest rates as high inflation "cooled".
An observer of Cryptocurrency Xiang Pengpai News (www.thepaper. cn) analyzed that the main reason for the cryptocurrency market's rise at the beginning of the year was that after the Federal Reserve raised interest rates sharply in 2022, the market's expectation of continuing to raise interest rates rapidly had been reduced, and the market's nervousness had eased. Secondly, there have been many potential explosions in the industry, reducing the probability of bad news.
According to the website of Barron Weekly in the United States, based on historical trends, Bitcoin may have bottomed out after a year long bear market last year and is expected to rebound. The price of Bitcoin has soared by more than 40% since the beginning of the year, but it cannot be ignored that the total market value of global Cryptocurrency has still dropped by two-thirds from the peak in 2021, from nearly $3 trillion to $1.1 trillion at present.
Yu Jianing believes that encrypted assets such as Bitcoin have become highly financialized, so the price probability cannot escape cyclical patterns. Cryptocurrency assets, represented by Bitcoin, have fallen nearly 78% in the past year and have reached the chip intensive zone of the previous bull market. It is not surprising to see a rebound in areas with strong support
The above Cryptocurrency watchers also believe that the slowdown of interest rate increase indicates that the biggest risk hanging on the market is beginning to ease. The slowdown in the pace of monetary tightening will definitely greatly enhance the confidence of risk markets.If there is no economic recession and industry unexpected thunderstorms, the overall crypto market will warm up this yearThe performance was better than in 2022, but the bull market is still early, and the market as a whole should still be in a period of broad consolidation after a sharp decline.
VetleLunde, a senior analyst at Arcane Research, a crypto analytics firm, pointed out in a report that the crypto market is overly optimistic about the Fed's rapid turnaround.
Big ups and downs
Big ups and downs20216.520221.6
The left is the price trend chart of Bitcoin, and the right is the total market value trend chart of Cryptocurrency. Image from CoinMarketCap
According to Yu Jianing's analysis, just as a bull market can make people FOMO (afraid of missing out), in extreme market conditions, the market can also cause many people to panic, leading to significant selling and platform runs. In the crypto bear market of 2022, there were numerous institutional chain liquidation crises, which can even be called a small Lehman moment in the crypto market. The size of funds affected is also among the forefront in the history of the crypto market, causing significant fluctuations in crypto assets represented by Bitcoin.
In the long run, Yu Jianing believes that,Exposing market risks appropriately and cleaning problematic projects is actually more conducive to the sustainable development of the crypto market in the future. The downward deleveraging market is an excellent historical opportunity in the long run. The crypto asset market will continue to maintain high volatility in the future, and it is not ruled out that there will be a deep correction in the future, but the long-term trend will continue
The above Cryptocurrency watchers said that the cryptocurrency market is an emerging investment market and its overall market value is very low. Compared to the stock market, it does not require a significant amount of capital to make the crypto market highly volatile, which is in line with the characteristics of emerging industries. However, the crypto market is still in its early stagesThe encryption market is only suitable for a few people with strong risk tolerance. Before the market matures, it is not suitable for public investment, but a Alternative investment.
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