Bitcoin is taking a break after hitting a record high of $108,000 for the first time, as traders await a Federal Reserve interest rate cut and gauge a wave of optimism stemming from President-elect Donald Trump’s support for crypto.
The largest token hit $108,315 on Tuesday before falling back to $104,775 on Wednesday. The total value of digital assets was close to $4 trillion during the initial surge, according to data compiled by CoinGecko.
Trump has pledged to introduce crypto-friendly regulations to allow the US to dominate the sector and has also backed the idea of establishing a national Bitcoin strategic reserve. MicroStrategy Inc.’s upcoming listing on the Nasdaq 100 Index has also added to the positive sentiment by opening up opportunities for further share price gains for companies whose primary activity is raising capital to invest in Bitcoin.
The Federal Reserve is widely expected to cut interest rates by a quarter percentage point on Thursday, but the policy outlook for next year is less clear due to strong U.S. economic growth and inflation risks from Trump’s broader agenda.
“We expect this week’s FOMC meeting to contribute to increased market volatility,” K33 Research analysts Vetle Lunde and David Zimmerman wrote in a note, referring to the Fed’s last monetary policy meeting for 2024. “Following the FOMC, we could expect a quiet week, potentially opening up room for Bitcoin momentum to build further over the holiday season.”
Bitcoin has surged more than 55% since Trump’s victory in the presidential election on Nov. 5. Investors have flocked to U.S. exchange-traded funds (ETFs) for the native cryptocurrency, shrugging off warnings about the token’s history of volatility, signs of overbought momentum, and the crypto’s lack of traditional valuation fundamentals.
On options exchange Deribit, one of the largest crypto derivatives platforms, the highest open interest for bullish bets was at the $120,000 strike price. Open interest refers to the number of contracts outstanding.
There are reasons to be “cautious in chasing Bitcoin” at current levels, such as Tuesday’s rally back to early levels around $106,000 despite an intraday surge to record highs, according to Tony Sycamore, Market Analyst at IG Australia Pty.
