Bitcoin prices have finally climbed past the $26,000 level that has dominated for the past month.
Dreamstime
Bitcoin
and other cryptocurrencies rose Wednesday ahead of the Federal Reserve’s latest move on monetary policy. With traders having piled into bullish bets ahead of the central bank’s interest-rate decision, crypto markets could be primed for volatility.
The price of Bitcoin has advanced less than 1% over the past 24 hours to above $27,150, trading near its highest point so far in September. The largest digital asset has moved comfortably outside of the $26,000 zone that has dominated trading for the past month amid historically low levels of volatility and volumes.
“Some relative stability in the cryptocurrency market, led by Bitcoin, which stabilized near the $27,000 level,” said analyst Wael Hammad of broker XS.com. “All sectors of the market are looking at the upcoming decision of the Federal Open Market Committee.”
Cryptos—like the
Dow Jones Industrial Average
and
S&P 500
—are poised to move on the back of the Fed’s next rate decision, due at 2 p.m. Eastern.
The central bank is expected to hold borrowing costs steady, with the focus falling on its next move in November as expectations remain in flux over whether another rate-hike is coming or if financial conditions are now tight enough to rein in inflation. The rate environment remains key for Bitcoin, which has come under intense pressure since the Fed began its tightening cycle last year. Higher returns on risk-free cash tend to dampen demand for riskier bets like cryptos.
There is potential for a spike in volatility around the Fed decision, with traders having piled en masse into bullish bets on Bitcoin in the perpetual futures market, the most liquid market in all of crypto, and chock-full of leverage, or borrowed money.
Bitcoin open interest—the amount of capital locked into active futures contracts—on Binance, the world’s largest crypto futures market, has climbed for a third day to $3.3 billion, according to data from Coinglass, with bets skewing firmly bullish. With so much leverage locked up in bets that prices will rise, a hawkish move from the Fed could spook traders and set off a cascade of selling, pushing Bitcoin prices violently downward as leveraged traders’ positions are wiped out.
Beyond Bitcoin,
Ether
—the second-largest crypto—traded less than 1% in the red at $1,640. Smaller tokens, or altcoins, were mixed, with
Cardano
down less than 1% and
Polygon
climbing 1%. Memecoins were muted, with
Dogecoin
just below flat but
Shiba Inu
up less than 1%.
Write to Jack Denton at [email protected]
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