Market Wrap: Bitcoin Near $58K on Fed Pledge to Keep Loose Policy
Bitcoin’s price flipped to green after Federal Reserve officials on Wednesday reaffirmed their expectations to keep interest rates close to zero at least through 2023, potentially bolstering the cryptocurrency’s appeal as a hedge against faster inflation.
As of press time, bitcoin was changing hands around $58,000, up from about $55,500 just before the Fed announced its decision around 18:00 coordinated universal time (2 p.m. ET).
The price has doubled this year, partly because of demand from institutional investors who are looking for an asset that might hold its worth if the dollar’s purchasing power declines. Central banks around the world have pumped trillions of dollars of freshly created money into global financial markets to stimulate their coronavirus-wrecked economies.
Wall Street firm Morgan Stanley’s wealth management unit on Wednesday published a research report arguing the “threshold is being reached” for cryptocurrency to become an investable asset class. On the same day, Morgan Stanley said it will offer its clients exposure to three bitcoin funds, while Hong Kong-listed software firm Meitu made additional investments in bitcoin and ether.
“This is a bullish step to further awareness and acceptance of bitcoin, and shows the organic underlying demand as investors look to seek alternatives to existing investment classes,” said Jason Lau, chief operating officer at San Francisco-based crypto exchange OKCoin.
Ether (ETH) was up on Wednesday, trading around $1,824.79 and climbing 2.24% in 24 hours as of 20:00 UTC (4:00 p.m. ET).
“Ether and bitcoin are still moving tightly together,” OKCoin’s Lau said.
At the same time, the number of BTC locked in the Ethereum blockchain saw a sharp rise on Wednesday after dropping for more than a month, according to data from DeFi Pulse.
“The hypergrowth that markets exhibited earlier in the year, especially with ether, appears on the surface to have subsided, but the reality could not be any different,” Denis Vinokourov, head of research at trading sentiment data provider Trade the Chain, said. “Specifically, the number of bitcoin locked on Ethereum continues to rise and much of this capital eventually lands across the DeFi ecosystem.”
A handful of lesser digital assets rose sharply Wednesday after Grayscale announced plans for new trusts linked to Chainlink’s LINK, Decentraland’s MANA and a handful of others. (Digital Currency Group is the parent of Grayscale and CoinDesk and an investor in Decentraland.)
Bitcoin’s temporary failure to move higher since Saturday’s all-time high may have also pushed some investors and traders to alternative cryptocurrencies.
“While this might be unexciting for bitcoin traders, it has ether traders licking their lips at the prospect of the leading altcoin regaining some market share,” Adam James, senior editor at OKEx Insights, said. “Likewise, traders will also be looking for altcoins and DeFi governance tokens to capitalize on a bitcoin consolidation.”
Digital assets on the CoinDesk 20 are mostly in green Wednesday. Notable winners as of 20:00 UTC (4:00 p.m. ET):