Digital assets are witnessing a notable decline, with Bitcoin dropping from nearly $44,000 to test the $40,000 level. This sell-off is extending to the altcoin market, reflecting weakened sentiment in both European benchmarks and Wall Street contracts.
Potential Impact of FOMC Decision
The crypto market is experiencing increased volatility, potentially influenced by the upcoming Federal Reserve interest rate decision scheduled for Wednesday at 8 pm. The slight losses in European benchmarks and gains in U.S. dollar futures suggest a reaction to the uncertainty surrounding the FOMC decision.
Bitcoin recently achieved its eighth consecutive upward weekly candle, triggering profit-taking pressure after a robust rally that propelled its price above $42,000. Coinglass data reveals a dynamic decline, liquidating approximately $270 million in long positions and $1.2 billion in open positions in the BTC options market.
Limited Supply and Investor Sentiment
Despite the significant correction, on-chain data shows investors depositing Bitcoins into exchanges at historically low rates, indicating a reluctance to sell despite the rally. This suggests limited supply, favoring higher prices and reflecting optimism towards the short-to-medium-term prospects for the crypto market.
Bitcoin’s exceptional performance in 2023, surpassing the rise of spot gold, has led to renewed considerations of it as the digital equivalent of gold and a potential haven. This narrative may be contributing to its resilience amid the market correction.
Altcoins’ Performance and Growth Prospects
While smaller cryptocurrencies have seen substantial increases, their average performance in 2023 lags behind Bitcoin and Ethereum. This presents both opportunities and challenges, with growth potential, but also raises questions about the long-term prospects for some lesser-known projects.