Bitcoin (BTC) experienced a resurgence, breaking through the $43,000 threshold on Wednesday, marking its highest point since the flash crash earlier in the week. As of now, it’s trading at $42,734.37 (12:05 am EST).
This bullish move had a ripple effect on the entire cryptocurrency market, propelling digital asset-focused companies’ stocks to new heights. The surge came as the Federal Reserve (Fed) hinted at potential interest rate cuts for the upcoming year, media reports said.
During the December Federal Open Market Committee (FOMC) meeting, officials at the U.S. central bank decided to maintain the Fed funds rate at the current 5.25%-5.5%. However, they also unveiled projections that indicated a gradual reduction in the rate, reaching 4.6% by the end of 2024, signalling approximately three 25-basis point cuts in the pipeline.
The market response to the Fed’s dovish projection was swift and dramatic. Bond yields and the U.S. dollar index (DXY) plummeted, leading to a broad-market rally in risk assets, including both stocks and cryptocurrencies.
Bitcoin (BTC), the most prominent cryptocurrency, surged beyond $43,000 during the late U.S. trading hours, marking an impressive 5% climb from its earlier position below $41,000.
Among the top-performing cryptocurrencies, large-cap tokens like Avalanche (AVAX), Cardano (ADA), and Injective (INJ) experienced gains of nearly 10%. This propelled the CoinDesk Smart Contract Platform Index (SMT) to the top spot in CoinDesk’s crypto sectors.
In addition to the crypto market surge, stocks of crypto-related companies also witnessed substantial gains. Leading crypto exchange Coinbase (COIN) closed the trading session with an almost 8% increase, while MicroStrategy (MSTR), under the leadership of Michael Saylor, recorded a 5% gain.
U.S.-listed Bitcoin mining companies, including Marathon Digital (MARA), Riot Platforms (RIOT), and CleanSpark (CLSK), which are often considered leveraged bets on Bitcoin, enjoyed substantial gains ranging from 8% to 16% throughout the day.
Analysts at Bitfinex noted, “Historically, a hold or reduction in interest rates tends to inject optimism among investors, as it implies more disposable income and potentially greater investment in various asset classes. This effect is not limited to traditional markets but extends to novel assets such as cryptocurrencies.”
