Hopes of softer fed action fuels crypto relief rally as Bitcoin climbs past $23K

Bitcoin broke past the $23,000 threshold for the first time in over a month as hopes of a interest rate hike less aggressive than feared from the US Federal Reserve triggered a relief rally in cryptocurrencies.

The world’s most significant cryptocurrency surged as high as $23,800, increase of 8% in 24 hours and exchanging at levels not seen since mid-June 2022. According to Coin Metrics data, it was last trading at a price of $23,330.80.

Traders took comfort from the viewpoint of softer policy action from the Fed at its next rate-setting meeting.

The effects of stringent monetary policy from the US central bank have weighed heavily on risky assets like crypto and stocks.

Bitcoin is still down roughly 50% since the beginning of 2021.

CEO of crypto lender Nexo, Antoni Trenchev, said this was not necessarily the end of the crypto bear market, but a relief rally for Bitcoin was long overdue. Antoni added that Bitcoin was beginning to find its feet after a shaky month, and the following week would be telling.

The US Federal Reserve is expected to increase the rates again at its next policy meeting. Still, economists are forecasting a less aggressive increase this time of 75 basis points rather than 100.

Cryptocurrencies were hyped as a source of value uncorrelated with traditional financial markets. But as institutional capital transferred into digital assets, that theory failed to materialize once the US Federal Reserve began hiking interest rates and traders fled equities.