Bitcoin (BTC) and various other cryptocurrencies experienced a surge in value on Tuesday, driven by digital asset traders who were overwhelmingly optimistic about the crypto market. This surge occurred in anticipation of the Federal Reserve’s upcoming interest rate decision scheduled for Wednesday, which may signify an early wave of speculative betting in an otherwise subdued market.
Katie Stockton, the managing partner at the technical research firm Fairlead Strategies, commented on the situation, stating, “Bitcoin is currently testing the initial resistance level at the 50-day moving average, which is around $27,200. This is part of a short-term rebound from oversold conditions, and it has successfully maintained a significant support level at approximately $25,200.”
On Wednesday, the central bank is widely expected to maintain its current borrowing costs, but investors will closely analyze signals from the Federal Reserve. This scrutiny arises from shifting expectations regarding the possibility of another interest rate hike in November or the continuation of rates at their current levels. It is worth noting that higher interest rates have previously exerted downward pressure on both Bitcoin and the stock market. Investors tend to shy away from riskier assets when risk-free cash or government debt offers attractive returns.
Leading up to the Federal Reserve’s decision, traders have adopted an increasingly bullish stance, particularly in Bitcoin perpetual futures, which represent the most liquid segment of the crypto market. Open interest, which indicates the amount of capital locked in active derivative contracts, has risen by 3% on Binance, the largest cryptocurrency exchange, in the past 24 hours. This follows a significant 14% increase observed on Monday. Importantly, the majority of these bets are skewed towards a bullish outlook, according to data from Coinglass.
Yuya Hasegawa, an analyst at the cryptocurrency exchange Bitbank, offered some perspective on the situation, saying, “It appears that some participants in the crypto market may be becoming overly optimistic ahead of the Federal Reserve’s meeting later this week, where it is widely expected that they will refrain from raising interest rates. Bitcoin’s rally may encounter a pause as there are no significant economic data releases scheduled until the conclusion of this month’s Federal Reserve meeting.”
Moving beyond Bitcoin, Ether (ETH), the second-largest cryptocurrency, experienced a modest increase of less than 1%, reaching a price of $1,650. In contrast, smaller tokens, often referred to as altcoins, displayed more robust gains. Cardano, for instance, climbed by 2%, while Polygon (MATIC) saw an impressive 3% surge. On the other hand, meme-based cryptocurrencies like Dogecoin and Shiba Inu made more modest gains, each advancing by 1%.