The price of Bitcoin has enjoyed a 0% surge in January, making the crypto market bullish. Positive sentiment among traders caused the crypto market to recover above the $1 trillion market cap. Investors are awaiting the U.S. Federal Reserve's rate decision. and Chairman Jerome Powell's view of the economy to decide their trade for the next few weeks.
Bitcoin prices continued to trade near the $23,000 level as bulls and bears struggled to maintain their dominance ahead of the Fed's policy decision. The 24-hour low and high for Bitcoin are $22,884 and $23,225, respectively.
Based on on-chain analysis, the circulating supply of stablecoins is decreasing in the crypto market. Stablecoins can be described as the liquidity of the crypto market. In 2020, a large increase in the supply of stablecoins resulted in a bullish crypto market. However, the supply of stablecoins decreased since February 2022, causing a bearish market that ended the journey for many crypto companies such as the FTX crypto exchange.
In January 2023, a short-term increase in the circulating supply of stablecoins led to a 40% increase in the price of Bitcoin. However, a crossover of trading levels between circulating stablecoins supplying MA 21 and MA 100 is likely to occur again. It will cause the price of Bitcoin to fall.
Bitcoin price
If the circulating supply of stablecoins does not increase further, the crypto market will enter a bear market again. It will impact investor sentiment in a big way.
The U.S. Fed. has raised interest rates by 425 basis points last year, with four consecutive 75 basis point rate hikes and 50 basis points in December. Markets expect a further reduction in rate hikes to 25 basis points due to cooling inflation, strong employment data and an increase in the U.S. GDP growth rate. at 2.9% in the fourth quarter.
According to CME's FedWatch Tool, there is a 99.3% probability of a 25 basis point rate hike by a U.S. Fed rate hike. U.S. Dollar Index (DXY) shows increased volatility ahead of Fed policy decision, risk of a fall in Bitcoin price.
Christopher J. Waller, a member of the Federal Reserve Board of Governors, insisted the Fed needs six months of data, not three months of positive data to consider a pivot. Therefore, the Fed is likely to hold off on rate hikes before their May 2-3 meeting.
