Bitcoin Surges to 17-Month High as Powell Adopts a Less Hawkish Tone

Bitcoin prices rose on Thursday as the Federal Reserve delivered a less hawkish message than anticipated by the markets. The broader cryptocurrency market also saw gains as the U.S. dollar weakened, and traders bet on the absence of further interest rate hikes.

The world’s largest cryptocurrency by market capitalization surged by almost 4% to reach $35,808, marking its highest level since May 2022. Ethereum, the second-largest cryptocurrency globally, experienced a 3% increase, reaching $1,866.19, which is close to a three-month high.

The cryptocurrency market found support in a weakening U.S. dollar and declining yields following the Federal Reserve’s decision to keep interest rates unchanged on Wednesday, in line with expectations. The U.S. dollar index dropped by more than 0.5% during Asian trading on Thursday.

Federal Reserve Chair Jerome Powell adopted a seemingly less hawkish stance regarding future interest rate hikes. While he kept the door open for one more rate hike this year, Powell also acknowledged the significant tightening of monetary conditions in recent months. Markets interpreted this as a signal that the Fed might not pursue further rate hikes and could potentially begin reducing rates by mid-2024. Traders responded by shifting out of the dollar and into risk-driven assets, benefiting cryptocurrencies.

Bitcoin surpassed the $35,000 threshold for the first time since May 2022. A series of high-profile bankruptcies in the crypto market, including Terra, Three Arrows Capital, and notably FTX, had caused significant declines in crypto prices over the past year. The world’s largest crypto token had fallen as low as $15,000 in late 2022.

However, the token has experienced substantial growth in recent weeks, driven in part by speculation that the U.S. markets may soon approve an exchange-traded fund directly tracking the price of Bitcoin. The Securities and Exchange Commission is currently considering applications from Grayscale, Ark Ventures, and notably, the world’s leading asset manager, BlackRock Inc (NYSE:BLK).

On a technical note, Bitcoin appeared to be on the verge of retracing a significant portion of its bear market decline over the past year. “Just a few hundred dollars higher at $36k is the 38.2% Fibonacci retracement of the entire bear market decline from $69k to $15.5k,” noted Tony Sycamore, a market analyst at IG.

Cryptocurrency markets also eagerly anticipated the quarterly results of the major exchange Coinbase Global Inc (NASDAQ:COIN), set to be released later on Thursday.