Bitcoin Recovers to $65K as Investors Assess Fed Decision Risk

Bitcoin recovered after falling 15% from last week's record as investors reduced risk. A less investor-friendly Fed decision on Wednesday due to robust U.S. economic statistics and persistent inflation could hurt crypto asset values, LMAX Group market strategist warned.

The Bitcoin {{BTC}} price rose to near $65,000 on Tuesday, but the Federal Reserve meeting on Wednesday will determine if the correction is finished.

After hitting several new all-time highs in recent weeks, the largest crypto by market value fell significantly from $74,000 on Thursday. It fell almost 15% to below $63,000 on Tuesday, pulling down other digital assets.

U.S. inflation readings were higher than expected last week, which could postpone the central bank's monetary policy easing and interest rate decreases.

The market unanimously expects rates to stay constant but will pay close attention to revisions to the dot plot, as cuts may be postponed due to persistently strong inflation," said Vetle Lunde, senior analyst at K33 Research. Investors may see Fed committee members' interest rate predictions for the coming year in the dot plot.

Lunde stated that investors' reluctance to take risks before the Federal Open Market Committee (FOMC) meeting contributed to Bitcoin's price decrease and poor flows into U.S.-listed bitcoin ETFs in recent days.

A more hawkish Fed message might reduce investors' appetite for risk assets like cryptocurrencies, impacting on prices and possibly extending the downturn.

The Fed decision this week poses a risk, with concerns over a less investor-friendly policy stance due to strong U.S. economic data and inflation," replied LMAX Group market strategist Joel Kruger via email. "While correlations between crypto and traditional assets have been low, a risk-off sentiment from the Fed decision could spill over into crypto."

BTC traded at $64,500, up from $63,000 but down 3.5% in 24 hours. Meanwhile, the broad-market CoinDesk 20 Index (CD20) fell roughly 5%.

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