Bitcoin lost momentum on Monday, teetering above and below $28,000 as investors appeared willing to wait for the next interest rate decision from the US Federal Reserve on Wednesday.
The largest cryptocurrency by market cap recently traded at around $27,745, down about a percentage point from 24 hours ago. By early Monday (UTC), bitcoin had climbed above $28,400 just hours after the US Federal Reserve announced it was partnering with five other major central banks to ensure a steady flow of the US dollar, a dominant reserve currency, into the global financial system. to ensure.
“Belief in the fiat banking system is rapidly waning and the only alternative safe haven that is portable is bitcoin,” Stefan Rust, CEO of data aggregator Truflation, wrote in an email to CoinDesk. “The rapid rise in the price of bitcoin is a sign of fears that more trouble is lurking in the banking sector – especially since the fall of Credit Suisse.”
Rust added, “The bank runs we are seeing are also making it difficult to access gold, while fears of inflation and hyperinflation in some countries are all driving a flight to BTC.”
In recent days, bitcoin’s price has risen as the threat of a global banking meltdown receded and investors hoped for more easing Fed policies, possibly even suspending the year-long series of rate hikes at the meeting that began Tuesday, though a 25 basis point increase seems most likely after last week’s only slightly improved inflation report.
“That’s probably the most likely,” Tom Shaughnessy, co-founder of crypto research platform Delphi Digital, told CoinDesk TV’s “First Mover” program.
Sunday’s announcement that the Fed would increase the frequency of its dollar swap lines with the European Central Bank, the Bank of Japan, the Bank of England, the Bank of Canada and the Swiss National Bank from weekly to daily aims to mitigate exchange rate volatility and avoid tensions in lending to households and businesses around the world, as CoinDesk Managing Editor Markets Asia Omkar Godbole reported, adding that “the increased frequency of swap lines has paved the way for an unabated rise in risk assets, including bitcoin. The leading cryptocurrency by market value is largely viewed as a hedge against the banking system.
Ether, the second-largest cryptocurrency by market cap, recently switched hands for about $1,731, down 3% from Sunday, the same time. Other cryptos in the top 25 by market value were largely in the red, with APT, the token from layer 1 network Aptos, and MATIC, the native crypto from layer 2 platform Polygon, recently up by more than 8% and 6% decreased. SOL, the token of the Solana blockchain, rose slightly.
Delphi Digital’s Shaughnessy said the driving force behind the current bitcoin surge and its potential sustainability were difficult to determine, though he noted that “this is the first time in history that we have a global banking crisis, and crypto to some extent highly validated and well known that people can now look for an alternative and get into crypto.”
Rust from Laguna Labs wrote that the Federal Open Market Committee (FOMC) announcement would likely determine the future of bitcoin.
“The only thing holding bitcoin back this week is the FOMC meeting, with investors nervously waiting for the Fed’s next interest rate decision,” he wrote, noting that if the Fed reverses its current policy, “markets will be very nervous and it will be a testing time for bitcoin.”
He added: “Will it continue to move in the opposite direction to global markets, or will it fall back in line? Certainly, the bitcoin maxis believe the former.”
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