Traders brushed aside concerns about “higher for longer” interest rates and a possible reemergence of the banking crisis on Wednesday and jumped headlong into financial markets, pushing the price of cryptos and stocks higher.
It was Boston Fed President Susan Collins’ turn to push back against overly optimistic expectations of an early interest rate cut, saying it could come “later this year,” but only after the central bank sees more evidence that inflation is cooling.
“I will need to see more evidence before considering adjusting the policy stance,” Collins said in a speech in Boston. “That said, as we gain more confidence in the economy achieving the committee’s goals ... I believe it will likely become appropriate to begin easing policy restraint later this year.”
Despite the growing acceptance that a rate cut won’t happen in March, and likely not even in May, stocks climbed higher on the back of positive earnings reports. At the closing bell, the S&P, Dow, and Nasdaq were all in the green, up 0.82%, 0.40%, and 0.95%, respectively.
Data provided by TradingView shows that after bottoming out at $42,765 late on Tuesday, Bitcoin (BTC) bulls went to work, pushing its price steadily higher throughout trading on Wednesday to hit a high of $44,305 in the afternoon.
BTC/USD Chart by TradingView
At the time of writing, BTC trades at $43,450, an increase of 0.6% on the 24-hour chart.
“After last week’s FOMC, the odds of a rate cut for the next meeting on 20 March tumbled from around 50% to just over 15% at the time of writing,” said market analyst Bloodgood in a Wednesday market update. “Since we’re in an election year, Powell has to be extra careful in treading the fine line between crashing the financial markets and causing unemployment by keeping rates too high and letting inflation run rampant by cutting too soon.”
“In any case, it’s safe to say that it’s only a matter of time now before ‘higher for longer’ becomes nothing more than a memory,” he said. “Given the inevitable pivot, I was surprised to see many takes claiming that cutting will be bearish for stocks and consequently crypto.”
Bloodgood said that perspective “might seem justified” at first glance because “some charts with the dates when the Fed previously started cutting rates [showed] that the market often continued to dump. What that simple analysis fails to take into account, however, is the fact that the Fed usually starts cutting in a very specific situation, namely that of a recession.”
He suggested that “as long as we don’t have something extremely unexpected happen out of the blue in the coming months, there’s every reason to believe that rate cuts in a non-recessionary environment will be very bullish.”
As for Bitcoin’s current price action, Bloodgood noted that it is holding “above the key weekly level,” and has “continued on its bullish path, even though the breakout was retraced right back to the level.”
“We have the halving event coming up in April and no major events until then, which means there could be a bit less volatility, especially if things in TradFi are also relatively calm,” he said. “Ideally, we keep ranging in the $40k-$47k area where altcoins have a chance to catch up.”
“The daily structure confirms that $42k is an important weekly level as it was tested a couple of times,” Bloodgood concluded. “Bulls will want to see this level hold or else we will print a new low somewhere around $38k or even lower.”
Altcoins continue their uptrend
It was a mixed but overall positive day for altcoins as the majority of tokens in the top 200 traded in the green on Wednesday.
Daily cryptocurrency market performance. Source: Coin360
A 77.45% increase for Space ID (ID) was the largest gain recorded, followed by a 26.7% surge for Monero (XMR), and a 21.3% increase for Dymension (DYM). Huobi Token (HT) had the worst performance, falling by 10.7%, while Ethereum Name Service (ENS) fell 6.42%, and Chromia (CHR) lost 4%.
The overall cryptocurrency market cap now stands at $1.67 trillion, and Bitcoin’s dominance rate is 50.9%.
