Fed rate optimism on bitcoin and gold amid US bank woes

Strong expectations of a halt to the Fed’s rate hike sent bitcoin (BTC) out of a tight $28,000 range, while spot gold made a new all-time high of $2079.52 an ounce.

Bitcoin rose to $29,241 in early New York trading Thursday as the Federal Reserve (Fed) announced a 25 basis point interest rate hike amid sentiments that it may soon change interest rate policy. Ethereum (ETH), Cardano (ADA), and Solana (SOL) also made gains.

Gold beats previous record, Bitcoin surges after Fed rally

Federal Reserve Chairman Jerome Powell hinted that a halt may follow as the current price is at a 17-year high. His language indicates that a recession in the United States is not inevitable.

Increase the Fed Funds Rate | source: Trading economics

Leading up to the announcement, the price of an ounce of spot gold rose to a record high of $2,079.52. Gold futures rose to $2,051.40. Saxo Bank analyst Ole Hansen He said That the ongoing saga of the US debt ceiling and “long term flat inflation” will see gold rally.

Hedging price of gold inflation
XAU/USD Daily Chart | source: TradingView

At the time of writing, spot gold is around $2,043.

On the other hand, the US banking crisis, the latest victim of which was PacWest Bancorp, is the reason for the renewed confidence in Bitcoin.

Edmund Goh of B2C2 crypto broker thinks:

“This rally that we saw after the banking crisis earlier this year seems directly related to a journey for safety and self-preservation of money away from the dollar.”

Further price action in gold and BTC, both of which are considered inflation hedges, could follow the May 28 US personal consumption expenditures index.

The depth of the bitcoin market is suffering from low flows

Despite the upside as a result of the banking crisis, analysts argue that the depth of the Bitcoin market was weak after the collapse of FTX and Alameda which led to a significant drop in BTC liquidity.

As a result, the asset was unable to sustain levels above $30,000.

In a recent interview, Bitcoin investor and former FTX supporter Kevin O’Leary confirmed this. He noted that bitcoin cannot exceed $35,000 until US regulators clear the way for institutional inflows.

Investors are also concerned about the imminent lawsuits against Binance, the bankruptcy of Genesis, and the imminent default of Digital Currency Group.

DCG must either restructure or pay off $630 million in debt to Genesis by May 9 to May 11 to avoid default.

According to Michael Safai of Dexterity Capital, which operates a high-frequency crypto trading desk:

“There is still a lot of organic momentum behind cryptocurrencies. “Major events pushing cryptocurrency prices beyond sticking points… are few and far between.”

At press time, Bitcoin is down to around $29,091.

For the latest Bitcoin (BTC) analysis from BeInCrypto, click here.


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