Bitcoin and other cryptocurrencies climbed on Friday, breaking a recent decline. Still, digital assets remained under pressure on a number of fronts, including the nearing U.S. debt-ceiling deadline and increased predictions of another interest-rate hike next month.
In crypto price prediction Bitcoin’s price has increased 1% in the last 24 hours to $26,450, keeping it at the lower half of a narrow trading range that has dominated for weeks. While Bitcoin has risen about two-thirds of its value this year, it has remained below the psychologically key $30,000 threshold, which was surpassed for the first time since June 2022 in April but proved unsustainable.
“This week, Bitcoin briefly dipped below its two-week range of $26,500 to $27,000, now challenging the critical $26,275,” said Rachel Lin, the CEO of trading platform SynFutures. “A close below this weekly range could negatively impact Bitcoin and the broader crypto market, but a bounce from this level could signify a possible recovery.”
Bitcoin has been following macroeconomic variables that affect the stock market but has recently moved more like the Dow Jones Industrial Average and S&P 500 than the Nasdaq Composite. Because both cryptos and the Nasdaq’s tech equities are more susceptible to changes in risk perception, Bitcoin is more closely tied to that stock index.
While in crypto price prediction Bitcoin has been in a holding pattern this week, the Nasdaq has been tearing higher in recent days, headed by Nvidia (NVDA). The explanation for this has nothing to do with bond rates or anticipation of more lenient Federal Reserve monetary policy — for this reason, Bitcoin has not followed. Much of the optimism in technology has stemmed from an investment frenzy about the potential of artificial intelligence, which is a stimulus unrelated to Bitcoin.
It exposes digital assets to more macro factors, with cryptos likely to continue changing in response to debt ceiling news, as a U.S. default risks draining liquidity from riskier portions of the market.
Bets on the Fed raising interest rates again in June have also weighed on Bitcoin sentiment after markets had already factored in the possibility. The Fed’s campaign of rate rises to combat inflation has been a major obstacle for digital assets over the last year, with Bitcoin’s 2023 climb aided by expectations that the worst was over.
“Patiently waiting on the other side of the U.S. debt ceiling debacle is a world where the outlook for inflation and interest rates is what drives the markets, and that means more choppy price action is in store for Bitcoin and cryptocurrencies,” said Antoni Trenchev, co-founder and managing partner of crypto lender Nexo.
According to the CME FedWatch Tool, markets are pricing in a 41% possibility of a quarter-point rate rise next month, up from less than 20% a week ago.
“Bitcoin faces headaches no matter where it looks,” Trenchev said. “A hopeful resolution to the U.S. debt ceiling drama simply returns the discussion to Fed policy and the possibility that not only might we see another rate hike in the coming months, but the likelihood of cuts by the end of the year is diminishing.”
Beyond Bitcoin, Ether — the second-largest crypto — rose 1.5% to above $1,800. Smaller cryptos or altcoins were more mixed, with Cardano flat and Polygon up 2%. Memes Coins were green, with Dogecoin and Shiba Inu gaining 1%.