Bitcoin jumps above $24,000 on dovish FOMC remarks – Cryptocurrency News
Bitcoin validated its strong 2023 performance by posting its best January since 2013, but it did not stop there as on Thursday it also managed to cross above the crucial $24,000 resistance region for the first time since last August. The main factor behind those gains was the slowdown in the Fed’s tightening pace coupled with dovish commentary by the Fed's chair Jerome Powell. Technically, many cryptocurrencies are now trading in overbought levels as bullish forces do not seem to let up, so could this trigger a downside correction?
Fed boosts risky assets
After a devastating 2022, the beaten down crypto prices are not only exhibiting signs of recovery, but they have also posted significant gains largely driven by a general improvement in risk sentiment. The latest FOMC meeting came to reinforce this trend as policymakers stated for the first time that the disinflationary process has indeed started. Stock markets rallied on the back of those dovish remarks, dragging cryptocurrencies higher as market participants raised their bets over a rate cut in late 2023 in contrast to what the Fed has repeatedly stated.
Additionally, this remarkable positivity surrounding digital coins is also reflected in other indicators such as the famous Crypto Fear & Greed Index, which reached its highest level since November 2021 when Bitcoin was trading near its all-time highs! Meanwhile, the so-called short squeeze phenomenon has also contributed to the latest rally in crypto markets, with more and more short-sellers rushing to hedge their positions by buying in the spot market in order to avoid further losses. However, in 2023 ultra-risky assets such as NFTs or meme stocks have also staged a comeback, thus it does not seem that investors are solely betting on crypto-related fundamentals but most likely the increased optimism has lifted all boats.
Cryptos regain trust of institutional investors , but why?
Undoubtedly, the crypto bear market in 2022 exposed flaws and failures in several cryptocurrency projects and business models, delivering significant blows to the trustworthiness of the broader crypto space. Data from a US blockchain analytics firm suggests that 2022 was the worst year ever for cryptocurrency frauds as hackers stole nearly $3.8 billion despite the increasing safety nets that crypto exchanges were said to have implemented.
Amid all this turbulence and in the absence of any significant regulatory intervention, institutional investors have increased their outflows in crypto-related investment products by over $117 million during the last week, which is the biggest weekly increase since last July, according to data from Coinshares. Hence, someone could argue that a moderate rally without any clear catalyst was just needed for investors to restate their trust on the crypto space.
Bitcoin reached crucial technical region
BTCUSD (Bitcoin) has been in a steady uptrend since the beginning of 2023, marching to a fresh 5-month high of $24,252 on Thursday before experiencing a minor pullback. Nevertheless, the king of cryptos is currently at a crucial technical crossroad.
On the one hand the 50-day simple moving average (SMA) is dangerously approaching the 200-day SMA, where a potential golden cross could accelerate the ongoing rally. Meanwhile, the price has also reached overbought levels, opening the door for a significant pullback in the near future.
In the positive scenario, should the price break above its recent high, further advances could then cease at the August peak of $25,200. Higher, the bulls could aim for the $27,960 support, which could now act as resistance.
On the flipside, should Bitcoin reverse lower, initial support might be found at the recent low of $22,300 before the $20,385 hurdle comes under examination.
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