Bitcoin (BTC) trimmed some of its losses from earlier in the day on Tuesday as market participants turned their focus to the expected interest rate hike by the US Federal Reserve on Wednesday.
At 16:56 UTC, the price of BTC stood at USD 39,199, up a mere 0.7% for the past 24 hours and 3% for the past 7 days. Meanwhile, the price of ethereum (ETH) stood at USD 2,604, up 1.5% in a day and 4% in a week.
The situation in the stock market was also similar, with the important US S&P 500 stock index up 1.56% for the day at the same time. In Russia, meanwhile, the stock market remained closed for the third week this week after heavy sanctions have hit the country as it attacked Ukraine.
The moves in the market came as market players turned their focus to a Federal Reserve meeting that starts today and concludes on Wednesday with an interest rate announcement from the Federal Open Market Committee (FOMC).
It is widely expected that the Fed will announce a rate hike of 25 basis points, marking the first rate hike in the US since before the pandemic.
Despite the rate hike marking an important moment, the Fed has for a long time communicated its intention to raise rates to the market. The event is therefore unlikely to have any major impact on markets, whether in crypto or otherwise, according to experts.
“I don’t see the Fed surprising anyone <...>. It’s going to be a quarter-point and then step into the background and watch what’s happening in Europe,” Steve Massocca, Managing Director at Wedbush Securities, told CNBC.
The same also appears to be the prevailing attitude among bitcoin investors, with the price remaining fairly stable for the day, consolidating right below the key USD 40,000 level.
“The prospect of a Federal Reserve interest rate hike, the ongoing tragedy of the Russia-Ukraine war, and China once again battling COVID are all weighing on trader sentiment across different asset classes. A rout in Chinese stocks shows once again how the global pandemic can violently move markets,” the Bitfinex trading team said in a note.
According to them, BTC “clearly has a long way to go before being immune to market sentiment.”
Analyzing the bitcoin market from an on-chain perspective, the research firm Glassnode said in a report from Monday that the accumulation of coins had softened in the short term. “This highlights the impact of global macro uncertainty on investor sentiment, with weaker accumulation taking place as a result,” Glassnode wrote.
However, the firm also noted that “a very large net outflow” has been seen on Coinbase over the past week, totaling BTC 31,130 (worth some USD 1.29bn).
“This remains a strong signal that investors increasingly see bitcoin as a relevant asset in modern portfolios,” Glassnode commented.
A similar sentiment was also shared by Will Hamilton, Head of Trading and Research at digital asset investment firm Trovio Capital Management, who said that several large players have moved coins off exchanges in recent days.
“[…] Bitcoin’s supply dynamics have shown some bullish accumulation activity this week,” Hamilton said, adding that “notable exchange outflows” were seen in the latter half of last week when BTC 40,700 were removed from exchanges.
“These large outflows provide further support for the Bitcoin Holder net position change […] which recently flipped into accumulation territory,” Hamilton said.
Meanwhile, Mati Greenspan, CEO and founder of Quantum Economics, pointed to a recent divergence between bitcoin and the US stock market, two asset classes that in recent months and years have tended to follow each other closely.
Per the CEO, BTC is now trading more like the US dollar versus other assets.
“[…] seeing bitcoin on pace with the US dollar is kind of comforting, given that the currency is acting as a safe haven for investors trying to exit Russian assets,” Greenspan said in his newsletter.