Bitcoin Falls to $26 K amid a Robust US Dollar: High Rates Challenge Crypto Firms

2023-10-12, 08:10

TL; DR

The Bitcoin price dropped to $26, 5 K after the Federal Reserve announced a pause in interest rate hike in September.

The prices of various U.S stocks fell during the fourth week of September.

Bitcoin is a good investment asset since it has had a return of more than 100 million % since its launch in 2009.

Introduction

During September the crypto market lacked a clear direction in terms of price movements. Most of the crypto assets could show explicit price moves for a short period. Likewise, the bitcoin price behaved in a similar way, despite having small upswings and downswings.

The Fed’s higher for longer policy has contributed to the lack of clear price directions for most digital assets. This analysis looks at Bitcoin price movements during the last week of September. We will also analyze how the equity market decline may affect the future bitcoin price.

Bitcoin Drops to $26,5K as U.S Adopts a Higher for Longer Fed Rate Policy

On Friday, 22 September the price of bitcoin dropped below the $27,000 level to trade at $26,500. Similarly, the prices of other major cryptocurrencies declined following the firming of the dollar’s strength and a possibility of risk aversion after the Federal Reserves’ decision to pause the fed rate hike in September.

In fact, in the 24-hour period that stretched from 21 to 22 September the bitcoin price decreased by 1% to trade at $26,644. That bitcoin price drop came after the Federal Reserve announced its intention to suspend interest rate increases during the month.

Irrespective of its bullish pressure the bitcoin price failed to regain the $27,000 value it had before the Fed announcement. Nonetheless, the $26,500 price level has remained a key support point to date.

Since 22 September the BTC price has been fluctuating between the $26,500 and $27,000 price level. As said above, Bitcoin was not the only cryptocurrency that experienced a fall in value. The values of several cryptocurrencies, including ETH, Cardano (ADA), Solana (SOL) and Dogecoin fell by different margins. For example the price of ETH fell by 1%, Solana by 3% and DOGE by 1.5%.

Equity Market Decline Might Lead to Further Bitcoin Price Drop

The decrease in prices of most major cryptocurrencies coincided with the general decline in the values of most equities. For example, the three major U.S equities lost their values by large margins while the prices of the U.S. stock futures remained flat in the early trading hours of 21 September.

During that period the investors might have been digesting the impact of the recently announced Federal Reserve’s “higher for longer policy.”

John Stefanidis, the CEO of Balthazar DAO, a blockchain infrastructure platform commented, “The drop in most tokens this morning could reflect the cautious stance of investors, who are carefully digesting the implications of the Federal Reserve’s recent interest rate remarks.”

Also, in its market update QCP Capital, a digital asset trading firm, wrote, “U.S. equity and rates markets have broken some very key levels on the back of this (Fed projection), and reflexivity can take over with the bearish thesis from here.”

It added that the decline in equity markets and the increase in treasury yields “could seep into crypto markets and take BTC lower with it, albeit with a lower beta as compared to other much stretched macro markets like the NASDAQ.”

The greatest hope for a possible bitcoin recovery lies in the different spot Bitcoin exchange-traded fund (ETF) applications in the United States.

To this effect, Markus Thielen, the head of research and strategy at Matrixport, digital asset service platform, said “If the SEC approves a Bitcoin ETF, which we believe is a 70% probability over the next six months, then there could be an immediate re-pricing and Bitcoin could be +20% more expensive in an instant.”

Despite the Fed rate pause in September, the U.S. central bank has projected that the interest rate may reach 5.6% by the year end, implying that we could see another 25-basis-point rate hike before that time. Nonetheless, the U.S central bank has promised fewer rate hikes in 2024.

James Bullard Former Federal Reserve Bank of St. Louis President, told Bloomberg that the U.S central bank may need to have additional interest rate hikes “to make sure that the core inflation continues to come down at an appropriate pace so the committee can get back to 2% inflation in a reasonable time frame.”

In the meantime, the Federal Reserve is going to have its next interest rate review meeting on 1 November. According to the CME FedWatch Tool, there is a 73.8% possibility that the Fed may hike interest in November. Currently, the Fed rate is at 5.5%, the highest since 2021 as the next diagram indicates.

Fed Funds Rate - Schwab

As the diagram shows, another 25-basis-point rate will take the interest rate to 5.6%.

Bitcoin Price Movement in 2023

Basically, 2023 started as a good year for most cryptocurrencies since they gained much during the first quarter. In July Bitcoin even surpassed $31,000 giving hope to many investors.
However, since the mid-year the BTC price has been fluctuating mainly between $26,000 and $27,500. At the time of writing investors can buy Bitcoin at $27,111 as the next graph shows.

Bitcoin Price - CoinGecko

As The Graph indicates, the BTC price is fluctuating between $26,960 and $27,270.

How to Buy Bitcoin on Gate.IO

Generally, it is very risky to invest in cryptocurrencies as their prices can fluctuate with large margins. However, over the years bitcoin has emerged as the best cryptocurrency to invest in. First, bitcoin is the number one cryptocurrency by market capitalization since many investors put their funds in it.

Second, there are many crypto companies that have invested in bitcoin. In addition, bitcoin is the only cryptocurrency which is a legal tender for some countries that include El Salvador and the Central African Republic.

Its return of over 100 million % over the past decade shows that it is a worthy investment asset. However, what many individual investors and crypto firms need to do is to time when to buy bitcoin. Many investors including crypto companies usually buy the dip which increases their potential profit.

Although the value of bitcoin falls in the short run it often attains new highs in the long term. That is why many crypto firms invest in it.

Investors often buy bitcoin on cryptocurrency exchanges like Gate.io. There are several reasons why individuals and institutions buy bitcoin at Gate.io, for example. First, they can pay using different methods like wire transfer, P2P trading as well as credit and debit cards, among others.

To buy bitcoin at Gate.io, you visit the Buy Crypto Section and select the appropriate payment method such as bank transfer as you can see in the next picture.

Once you select your payment method you simply follow the given instructions.

Conclusion

On 22 September the bitcoin price dropped to $26,500 after the Federal Reserve announced a pause in interest rate for the month. Nevertheless, the central bank has maintained a higher for long policy on interest rates. Also, the decline in the equity market is likely to influence prices of cryptocurrencies like bitcoin down.

Author: Mashell C., Gate.io Researcher

*This article represents only the views of the researcher and does not constitute any investment suggestions.

*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.