Bitcoin‘s price showed signs of recovery on January 16, with analysts suggesting that the cryptocurrency could be bolstered by the possibility of the Federal Reserve pausing interest rate hikes in its upcoming meeting at the end of January in the United States. At the time of the report, Bitcoin had risen by 0.91% in the last 24 hours, trading at $42,911.
The Federal Reserve is set to decide on the direction of its monetary policy in a meeting within 15 days. According to the CME FedWatch tool, there is a 97.4% probability that the Fed funds rate will remain within the current target range of 5.25% to 5.50%. Bitfinex analysts have stated that a pause in interest rate hikes in January could lead to a potential increase for Bitcoin, while providing relief to a tense banking sector and traditional financial circles.
Analysts also referenced the Summary of Economic Projections, which anticipates the central bank to cut policy rates by approximately 75 basis points throughout 2024. They highlighted that these potential cuts are seen as a move to support the economy, especially if inflation remains in line with the Fed’s stability goals. However, the timing and scale of these rate cuts are critical, as premature or excessive reductions could reignite inflation, while delays or minimal cuts could hinder economic growth.
Amid these developments, on-chain data indicates a steady increase in Bitcoin exchange reserves since the end of December, suggesting a continued selling pressure on the cryptocurrency. Data from the blockchain analytics platform CryptoQuant shows that the liquid supply of Bitcoin on centralized exchanges has risen by over 2% in the past month, from 2,060,000 to approximately 2,101,400.
Recently, excitement over spot Bitcoin ETFs has led to optimistic sentiment among investors regarding Bitcoin’s price. However, the anticipated surge following the launch of ETF products has not materialized, leaving many investors disappointed. The process has been marred by manipulation and an increase in false news, causing the hype to dissipate before it could begin.