Bitcoin is trading in the range of $36,500 and $38,000 Wednesday afternoon, after Federal Reserve Chairman Jerome Powell said the central bank “is of a mind” to raise interest rates in March to fight inflation.
Fears of a hawkish Fed have led to broad selloffs 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 13.5% loss over the past month.
The Fed statement and Powell remarks didn’t indicate any “real changes in the overall outlook,” said Chris Brendler, managing director and senior research analyst at investment firm D.A. Davidson. “So I think we’ve sort of seen bitcoin react alongside with the rest of the market as the Fed stance was relatively in line with expectations.”
Louis LaValle, managing director at crypto fund manager 3iQ Digital Assets said that “I think investors will take a breath right now after Powell’s remarks. But that question of how soon and how much will the Fed move, it’s still out there.
“I think in the near term, you’re gonna have more continued asset price volatility across all asset classes, and bitcoin and crypto are going to follow suit,” LaValle told MarketWatch in a phone interview.
Though bitcoin is suffering from a deep correction, some analysts noted that the crypto market now has “stronger fundamentals” than during previous market cycles, as more digital asset projects have come into the market and attract more money, according to a Wednesday report by crypto asset manager Grayscale.
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.