Bitcoin Rises After Fed Holds Steady. What Comes Next.

Bitcoin

and other cryptocurrencies were gaining Thursday after Federal Reserve officials gave a surprisingly strong signal of interest-rate cuts next year.

The price of

Bitcoin

has risen 4.1% over the last 24 hours to $42,869, although it remains below its recent peak of $44,000.

Fed Chairman Jerome Powell struck a dovish tone in his comments alongside the central bank’s decision to hold interest rates steady on Wednesday. Meanwhile, forecasts from Fed officials showed a median consensus of three quarter-point rate cuts coming next year.

“High real interest rates have weighed on Bitcoin’s valuation, so we expect rate cuts to help support crypto markets. A soft landing for the U.S. economy, Fed rate cuts, and a potentially contentious presidential election should all be macro tailwinds for Bitcoin in 2024,” said Zach Pandl, managing director of research at digital asset manager Grayscale. 

Bitcoin

and other cryptocurrencies were being boosted by a broader rally in risk-sensitive assets, which should gain from lower rates, but some analysts are cautious of backing a continued rally. Bitcoin has surged more than 50% in less than two months, benefiting from anticipation that U.S. regulators will soon approve the first exchange-traded funds linked to spot Bitcoin trading.

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“While we share the view that U.S. interest rates have peaked, we believe that the market has priced in a lot of good news lately, which suggests that prices could enter into a consolidation phase before the focus shifts back to the looming launch of the ETFs,” Julius Baer analyst Manuel Villegas wrote in a research note. 

Beyond Bitcoin,

Ether

—the second-largest crypto—rose 4.9% to $2,284. Smaller tokens, or altcoins, also were in the green, with

Cardano

up 13% and

Polygon

gaining 4.5%. Memecoins also rose, with

Dogecoin

up 4.5%.

Write to Adam Clark at adam.clark@barrons.com

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