Bitcoin kept regaining ground on Wednesday, mirroring an advance in U.S. equity futures ahead of a pivotal Federal Reserve decision that will shape expectations for monetary tightening.
The world’s largest cryptocurrency by market value advanced close to $38,000 at 2 p.m. in Hong Kong, its highest level since Jan 21, when a selloff in virtual coins and other risky assets accelerated sharply.
Bitcoin is recovering from a swoon that saw it dip below $33,000 on Monday, more than 50% off its November peak, prompting some analysts to point to $30,000 as a key support level. That’s a threshold Bitcoin hasn’t breached since July.
Crypto’s correlation with equities strengthened in recent weeks as investors reacted to the prospect of tightening U.S. monetary policy by dumping high-priced tech stocks and digital tokens alike. Bitcoin’s moves in tandem with the Nasdaq 100 and the S&P 500 reached an all-time high this month, buoying confidence that one of the world’s more volatile major assets could become more predictable in future.
“Markets may have already priced in rate hikes,” Fadi Aboualfa, head of research at Copper.co, said in an email Wednesday. “With the latest market selloff, I would expect that the Fed softens its tone as to stem any further panic. Bitcoin will follow the general market sentiment at this point.”
The Fed is due to finish its two-day meeting on Wednesday, with a policy decision from Chair Jerome Powell shortly afterwards. Bloomberg Economist Anna Wong expects the committee to keep rates steady and maintain the current pace of tapering, while telegraphing a rate hike for March.
“The overall sentiment in crypto is let’s try and settle in a range and do short term trading or find dislocations,” said Todd Morakis, co-founder of digital-finance product and service provider JST Capital, in an email Wednesday. “There are some bargain hunters here, but most of the people have been waiting for a time to invest in crypto and will continue to buy quality coins as the market moves down.”