• Bitcoin’s price surpassed even the most bullish projections after the Federal Reserve announced a 25 basis points interest rate hike.
• The U.S. private-sector hiring data from the ADP payroll survey revealed that it was significantly slower in January, fueling investors’ expectations of future interest rate hikes.
• Bitcoin gained 6.5% in five hours after testing the $22,500 support on Feb. 1 and is now flirting with the $24,000 level.
On February 1 and 2, Bitcoin’s price surpassed even the most bullish projections after the Federal Reserve announced plans to raise interest rates by 25 basis points. Market sentiment towards Bitcoin was boosted further by weak employment data released by the ADP payroll survey, which revealed that U.S. private-sector hiring was significantly slower in January than the market consensus of 160,000. These two factors combined to fuel investors’ expectations of future interest rate hikes by the Fed going forward.
Following this announcement, Bitcoin tested the $22,500 support on February 1, before gaining 6.5% in just five hours, and is now flirting with the $24,000 level. While the recent gains are exciting, traders should note that the improvement in crypto market sentiment tracked the risk-on attitude seen in traditional markets. Stocks with negative operating margins such as Coinbase (COIN), Cloudflare (NET), Unity Software (U), and DoorDash (DASH) all saw significant gains of 20%, 15%, 12%, and 10% respectively on February 2. This should be a warning sign that the gains of the last few weeks might not be sustainable.
It is also important to remember that Bitcoin is still a volatile asset, and traders should exercise caution. The Fed’s interest hike matched the market consensus, but investors should keep an eye on further developments in the US economy and employment data to gauge the sustainability of Bitcoin’s current rally.