Bitcoin Passes $23,000 as Prospects of a Dovish Fed Spark a Digital Recovery Run

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Bitcoin crossed the $23,000 barrier for the first time in more than a month, as the Federal Reserve’s less aggressive-than-feared rate rise spurred a relief rally in cryptocurrencies.

According to Coin Metrics data, the world’s largest cryptocurrency climbed as high as $23,902 on Wednesday, up 7 percent in 24 hours and trading at levels not seen since mid-June.

Traders were encouraged by the potential of the Fed easing policy at its upcoming rate-setting meeting.

The impacts of the Federal Reserve’s tighter monetary policy have impacted hard on riskier assets such as equities and cryptocurrency.

Bitcoin is still down nearly 50% since the beginning of 2021.

“A relief rally for Bitcoin is long deserved,” said Antoni Trenchev, CEO of crypto lender Nexo.

“Bitcoin is regaining its footing after a rough month,” Trenchev said. “The next week will be telling.”

The Federal Reserve of the United States is likely to raise interest rates again at its next policy meeting, although this time by 75 basis points rather than 100.

Cryptocurrencies were marketed as a store of value that was unrelated to established financial markets. However, when institutional money flooded into digital assets, that assumption fell apart when the Fed started raising interest rates and traders abandoned stocks.

According to Yuya Hasegawa, crypto market analyst at Japanese crypto exchange Bitbank, a rise over $22,700 suggests the cryptocurrency has now regained its 200-week moving average, creating the technical framework for a “trend reversal.”

“The market needs a bit more certainty that the Fed will slow the pace of rate hikes,” he added. “However, the short-term view for bitcoin is bright, and it might reach $29k this week.”

Meanwhile, traders believe that the worst of a severe market contagion triggered by liquidity concerns at several prominent cryptocurrency businesses has passed.

In recent months, digital currencies have been subjected to intense selling pressure as the failure of many significant initiatives generated rippling effects in the market. Terra, a so-called algorithmic stablecoin, plummeted to near-zero in May, triggering a cascade of events that resulted in the bankruptcy of cryptocurrency businesses Celsius, Three Arrows Capital, and Voyager.

Ethereum ‘Merge’Also in crypto, ether rose more than 1% to $1,543.76, while other so-called “altcoins” rose as well.

The second-largest token has risen more than 40% in the last seven days, propelled by anticipation of a widely anticipated network update known as the “Merge.”

The change, which will transition ethereum away from ecologically hazardous crypto mining and toward a more energy-efficient system, is now expected to be finished by September 19.

“Crypto mining has been heavily criticized for contributing to climate change due to its energy intensive nature,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. “As wildfires rage across Europe and the United States, the promise that Ether transactions could be less damaging to the environment has sparked a wave of interest.”

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