Bitcoin rose on Wednesday, reversing early losses, as investors took a break from the recent pullback and weighed the Federal Reserve’s latest policy decision.
The price of the iconic cryptocurrency was last up 1.7% at $65,773.23, according to Coin Metrics. Earlier, it fell as low as $60,793.60.
Cryptocurrencies rallied at the end of the Federal Reserve’s two-day policy meeting, where the central bank kept interest rates steady as expected and said it still sees multiple rate cuts this year. Like tech stocks, bitcoin sometimes benefits from low interest rates and improved market liquidity, which can lead to better sentiment and greater investment in growth assets.
Bitcoin turns higher after two days of losses
“There has been an inverse relationship between interest rates and the price of bitcoin,” said Oppenheimer executive director Owen Lau. “When the Fed raised rates in 2022, it took liquidity out of the market, which affected bitcoin and tech stocks. When the Fed cuts rates, it provides liquidity to the market, which will benefit risk assets like bitcoin. Bitcoin is a bit of everything — it sometimes trades like a high-tech beta stock.”
Bitcoin has fallen 10% in the past week, after hitting an all-time high of $73,797.68 last Thursday. It is still up 53% for the year.
Ether it was last up 1.2% at $3,379.43 on Wednesday, after topping $4,000 last week. Polygon’s matic token gained 1.5%, Solana was flat and dogecoin jumped 7%.
Crypto-linked stocks fared better throughout the day. Coinbase increased 11%. MicroStrategy added 9%, after falling about 20% earlier this week. In the mining sector, Iris Energy and CleanSpark rose 26% and 22%, respectively. Marathon Digital advanced 16% and Riot Platformswhich JPMorgan upgraded Wednesday to overweight from neutral, rose 11%.
The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all closed at record highs after the Fed meeting concluded.
The recent weakness in bitcoin began as traders started to take profits after it had soared about 70% since the start of the year to its peak last Wednesday. Data from CryptoQuant shows a huge spike in short holders selling their bitcoin at a profit on March 12. That profit-taking led to a surge in long liquidations of bitcoin leveraged positions that continued into early this week, according to CoinGlass.
“We’ve seen 20%-30% pullbacks in previous bitcoin bull markets as a normal occurrence when things start to heat up. And we’ve certainly had a lot of signs in the past week that things are heating up quite a bit,” Vijay Ayyar, vice president of international markets and development at crypto exchange CoinDCX, he told CNBC.
If bitcoin were to fall below the $60,000 mark, the cryptocurrency could weaken further to test the $50,000 to $52,000 level, Ayyar added, “which would be our line in the sand to sustain this bull market . [itself] moving forward.”
—CNBC’s Ryan Browne contributed to this report.