© Reuters.
Investing.com — The price of the gold rose above $17,000 for the first time since mid-December on Monday, leading to gains in the broader cryptocurrency markets as traders grew in anticipation that the Federal Reserve is softening its hawkish stance this year.
BTC rose 1.7% to $17,235.3 at 00:26 ET (05:26 GMT), helped by dollar weakness after US non-farm payrolls data released on Friday showed the market US employment was cooling. This gives the Federal Reserve less economic leeway to raise interest rates at a sustained pace.
The world’s second-largest cryptocurrency, also hit a more than three-week high, advancing 4% and crossing $1,300 for the first time since mid-December.
The prospect of a slowdown in interest rate hikes by the Fed is a big relief for the cryptocurrency market, which has fallen in value through 2022 as the Fed’s monetary tightening ends two years of ultra-accommodative policy enjoyed by this space. This precipitous drop in value also triggered a series of high-profile bankruptcies, from which the cryptocurrency market is still recovering.
This week, the focus is also on the inflation data due out on Thursday. Signs of easing price pressure could prompt the Fed to put the brakes on its hawkish rhetoric.
But even though bitcoin stands to gain from a less belligerent Fed, the cryptocurrency is trading at a fraction of the highs reached in 2021. The cryptocurrency fell 65% in 2022, a fall that has called into question its proposed status as a store of value, a currency, or even an inflation hedge.
This precipitous drop in value, coupled with a string of high-profile cryptocurrency bankruptcies in 2022, has also soured retail investor sentiment towards cryptocurrencies in general.
Bitcoin lost more than two-thirds of its value in 2022, and has so far struggled to make a comeback in the first trading week of the year.
Yet past cycles have shown that cryptocurrency bulls only happen during times of easy monetary policy. With the Fed poised to ease its hawkish stance this year and halt its rate hike cycle later in the year, crypto could see some strength in 2024.
But it remains to be seen whether Bitcoin will be able to recover from a severe hit to retailer sentiment and the potential tightening of regulations.
By Ambar Warrick