Bitcoin Holds Steady At $26.5K As Markets Expect Fed To Further Hike Interest Rates
The leading cryptocurrency closed this week’s trading in a steady $26,500 range after the Federal Reserve released its latest Summary of Economic Projections, which suggested that the U.S. central bank’s fund rate is likely to reach 5.6% by the end of the year.
Members of the Federal Open Market Committee (FOMC) believe an additional quarter-point increase in dollar interest rate will be necessary to curb inflation fears. The policy measure is set to be implemented during the Committee’s meetings coming November or December.
Fed Officials Prepared To Further Hike Borrowing Interest On The Dollar
The median forecast for 2024 shows a federal fund rate of 5.1%, a notable increase from June’s forecast of 4.6%. The financial markets view this as an indicator of reduced rate, while growing optimistic about improved economic conditions next year.
According to a senior economist at Vanguard – the world’s second-largest investment firm with assets worth over $7 trillion under management, lowered federal rate cuts combined with more expected economic growth and improved unemployment figures suggest that the Federal Reserve is confident in the U.S. economy’s ability to withstand higher interest rates and achieve a “soft landing.”
Bitcoin (BTC), which is regarded alongside gold and precious metals as a hard currency that can act as a hedge against inflation, has shown an interesting price dynamic to interest rates set by the Fed in recent years. Whenever the borrowing rate on the dollar is low, investors tend to turn towards the so-called “digital gold” anticipating higher returns.
Investors seeking to protect their wealth from inflation regard Bitcoin as a refuge, thanks to its status as a safe haven asset.
Long-Term Holders Have More BTC In Their Supply Than Ever Before
Meanwhile, the accumulation of Bitcoin is in full steam amongst long-term holders (LTHs), according to data procured by market analytics firm TradingView. The cryptocurrency delivered a strong ending to the trading week, having brushed off macroeconomic catalysts from the U.S.
Experts predicted a slow weekend for BTC but also assumed the digital asset could start to see some upward movement in price from Monday onwards. A few skeptics had hoped for a “liquidity hunt”, where traders would exit their positions if the cryptocurrency closed the week on the lower side. But this is yet to happen.
Keith Alan, the co-founder of crypto research firm Material Indicators, posted on X (formerly Twitter) that he found bid liquidity for Bitcoin closely following its spot price.
However, short-term holders (STH), traders who have held Bitcoin for 155 days or less, are exiting their positions in masses, citing fears of permanent loss. The cohort now holds an all-time low BTC supply than at any point in the last decade.
According to a report by crypto analytics firm Glassnode, these traders are in “panic mode” as they are expected to incur a 97.5% loss on their investment. As of September 17, the cost basis for those not liquidating their BTC stands at $28,000, which is about 5% higher than the current spot price.
The fears of STHs began after traders and analysts predicted that Bitcoin could test lower levels in the months ahead of April’s reward-halving event. Meanwhile, the Fear & Greed Index for the cryptocurrency remains only modestly bearish.
Glassnode reported that with STHs “now underwater on their supply”, there is a negative shift in market sentiment as they are spending less on Bitcoin, a panic scenario that is being observed for the first time since the collapse of the FTX exchange in November 2022.
Glassnode provided some good news for those who are optimistic about a Bitcoin rally. The analytics firm highlighted there are more long-term holders (LTHs) in the market than ever before, suggesting that it is a good time to accumulate the apex cryptocurrency.
At the time of writing, Bitcoin (BTC) was trading at $26,169 – down 1.5% from the previous day’s price.
