Bitcoin and other cryptocurrencies edged up Tuesday after a Monday tumble as traders awaited a key monetary policy decision from the Federal Reserve this week. Bitcoin ended up having its best January since 2013, when it changed hands below $20.
The price of Bitcoin rose about 1.8% in the 24 hours through 4 p.m. in New York, sitting at about $23,100. The largest token was carried higher along with other risk assets by encouraging economic data that showed wage growth slowing more quickly than expected, a development that traders hoped could give the Fed room to raise interest rates more slowly. The price rise came on the heels of a near 5% plunge on an intraday basis on Monday.
“Bitcoin has massive resistance at the $24,000 level, so if risk aversion remains in place, downward momentum might not find major support until the $21,000 region,” said Edward Moya, an analyst at broker Oanda.
Bitcoin’s declines Monday marked the biggest fall since Nov. 11, when the crypto exchange FTX went bankrupt in a shock to markets that sent Bitcoin to two-year lows around $15,500. Bitcoin languished below $17,000 through the end of last year, but has soared some 40% in January—the best monthly performance since October 2021 and the best start to the year since 2013, when it was less than a thousandth of the current price.
Traders are looking ahead to the next interest-rate decision from the Fed—a key catalyst that is likely to swing sentiment for cryptos and stocks alike. Both risk-sensitive asset classes have become more correlated over the past year, with Bitcoin swinging in step with the Dow Jones Industrial Average and S&P 500 against a backdrop of high inflation and rising interest rates.
Markets expect the Fed to raise rates by one-quarter of a percentage point on Wednesday, increasing borrowing costs but marking a slowdown in the pace of tightening financial conditions. Fed policy has been a key headwind for equities and digital assets over the past year because higher rates dampen demand for higher-risk assets.
The Fed decision represents a risk for cryptos after such a good month, and it may take some very upbeat news—signs of a dovish pivot in policy, for instance—to keep the good times rolling for Bitcoin. If investors don’t like what they hear, digital assets are at risk for a retracement.
“Bitcoin confirmed a short-term counter-trend ‘sell’ signal,” said Katie Stockton, managing partner at technical research group Fairlead Strategies, “supporting a two-week pullback following a strong relief rally. We return to a bearish short-term bias.”
Bitcoin will find initial support near its 200-day moving average around $19,700, Stockton said, which is a level it is likely to test during a retracement, and could find secondary support above two-year lows at $15,600.
“Resistance of $25,200 is not likely relevant near-term,” Stockton added. “A long-term bearish bias remains appropriate, in our view.”
Beyond Bitcoin, Ether—the second-largest crypto—rose about 2.2% to about $1,587. Smaller cryptos or altcoins also had gains, with Cardano and Polygonup about 5% and 4% respectively. Memecoins had a sharper rise, with Dogecoin jumping 10% and Shiba Inu up 9%.