Bitcoin meets FOMC after 39% hike as Fed path remains ‘uncertain’

Bitcoin (BTC) settled at around $23,000 on Feb. 1 after posting its best January in a decade.

The end of the bear market for Bitcoin is a “default position”

Data from Cointelegraph Markets Pro and TradingView confirmed a monthly close around $23,100 for BTC/USD — the highest since July 2022.

According to statistics from Coinglass, the leading cryptocurrency closed the first month of the year up 39.6%.

The impressive performance emboldened the bulls, many of whom remained confident despite the doubts en masse voiced by more conservative market participants.

“Bitcoin closes on monthly swing low”, commented trader, entrepreneur and investor Bob Loukas.

“I mean, anything can happen, right. But the default position should be that the bear market ended in December.”

As Cointelegraph reported, opinions differ greatly on how Bitcoin will perform in February, with one trader expecting a return to “bearish” conditions after five-month highs.

The picture for the month ahead continues to be clouded by macroeconomic factors. In particular, the US Federal Reserve will confirm its next interest rate hike on February 1st, while the European Central Bank will do the same on February 2nd.

Although the 25 basis point (bps) increase is already “unanimously” expected, according to cryptocurrency research and analysis company Arcane Research, the future remains less certain.

“Because of a relatively strong market recovery, Chairman Powell could take the opportunity to maintain a hawkish tone, emphasizing the importance of incoming economic data,” he argued in an article published Jan. 31, adding that the consensus “expects a 25 basis point increase on Wednesday and another 25 basis point increase to 475 bps on March 22″.

“At the moment, the most likely outcome is the wiping out of the hikes during the FOMC meetings on May 3 and June 14, but a further 25bp hike remains possible,” he noted.

Expectations for a 25 basis point hike were 99.3% at the time of writing, according to CME Group’s FedWatch Tool.

If the door is still open to surprises, volatility could increase accordingly, given that rate hike decisions are themselves a classic catalyst.

However, Arcane has shown that with each rally, the volatility around the Fed’s move has reduced.

“This may suggest that the trend of massive FOMC-induced volatility towards BTC is reversing,” he concluded.

Dollar strength is a benchmark for rebounds

Another concern that could affect the performance of cryptocurrencies is the strength of the US dollar.

Related: Best January since 2013? 5 things to know about Bitcoin this week

In a market update last week, trading firm QCP Capital warned subscribers that a “massive positive divergence” was afoot on the US dollar index (DXY).

Traditionally inversely correlated to risk assets, DXY has been down since mid-2022 but has capped losses in the new year.

“This is the same setup we saw for BTC/ETH in December, and as we saw there, any breakout to the upside will therefore be extremely abrupt and violent,” QCP wrote.

The views, thoughts and opinions expressed herein are those of the authors only and do not necessarily reflect or represent the views and opinions of Cointelegraph.