After the U.S. Federal Reserve (FED) announced plans to raise interest rates by 25 basis points on February 1 and 2, Bitcoin's (BTC) price outperformed even the most optimistic price forecasts.
Despite telling investors not to look at interest rate reductions in 2023, FED head Jerome Powell made it clear at his press conference that the current focus is on the job figures.
On February 1, the findings of the ADP payroll survey showed that hiring in the U.S. private sector had drastically slowed down in January. The private sector payrolls as measured by ADP were 106,000, significantly less than the market consensus of 160,000.Investors' expectations of future interest rate increases by the FED were boosted by these facts.
Bitcoin gained 6.5% in five hours after testing the $22,500 support on February 1 and has since been vying with the $24,000 mark. Even though the recent gains are thrilling, traders should be aware that the rise in market sentiment for cryptocurrencies followed the risk-on stance observed in conventional markets.
On February 2, stocks with negative operating margins saw notable advances, including 20% for Coinbase (COIN), 15% for Cloudflare (NET), 12% for Unity Software (U), and 10% for DoorDash (DASH). That element by itself ought to serve as a red flag that the gains of the last few weeks might not be long-lasting. It's also crucial to keep in mind that the 40-day correlation between Bitcoin and the S&P 500 is still higher than 75%.
Potential regulatory obstacles might have also been a major factor in sustaining Bitcoin's upward movement. Former member of the People's Bank of China's (PBoC) Monetary Policy Committee Huang Yiping recently argued that a blanket ban on cryptocurrencies might lead to several lost opportunities.
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