Bitcoin (BTC): Price drops – focus on US financial policy

The price curve of the cryptocurrency Bitcoin (BTC) has shown a slight downward trend since Sunday. Experts see this as a reaction to US fiscal policy, where the Federal Reserve will decide on the key interest rate today.

The hoped-for Christmas rally of Bitcoin (BTC) is experiencing a setback. The price curve has fallen for the third day in a row and Bitcoin has fallen back to a price level of around USD 41,000. At the end of last week, BTC was still trading above USD 43,000. Experts believe that uncertainties about US financial policy are also affecting Bitcoin.

In the US, as in Europe, high inflation rates since the beginning of 2022 have forced central banks to gradually raise key interest rates to record levels. This is not necessarily helpful for Bitcoin and co. because investors can also expect good interest rates on low-risk government bonds in this environment. The US Federal Reserve is now discussing the key interest rate today (Wednesday) and the European Central Bank (ECB) tomorrow. Both face a difficult decision. On the one hand, inflation appears to be contained, which could allow a pause in interest rate hikes or even a reduction in the key interest rate.

On the other hand, the US labor market is running hot and the inflation rate is still just above the targeted 2%. Many analysts are therefore predicting that the high key interest rates will not be changed for the time being and that cuts are not expected until 2024. Bitcoin (BTC) is not the only cryptocurrency to react to the situation; the stock markets are also undecided.

This is also causing the so-called altcoin season on the crypto markets to stall. Although prominent representatives such as Solana (SOL) and Avalanche (AVAX) are still up significantly over the past seven days, they are now correcting where Bitcoin is no longer driving the overall market.

Conclusion: Bitcoin and co. hope for stimulus

A cut in key interest rates in the US or the eurozone could play into the hands of Bitcoin, Solana and co. and trigger a resumption of the Christmas rally. But that does not look likely. A decision by the US Securities and Exchange Commission (SEC) on Bitcoin ETFs is also still pending. Optimistic forecasts for Bitcoin have led to significant gains since mid-October. Experts have identified January 10, 2024 as the date by which the SEC could decide to give the green light for Bitcoin ETFs. There are many indications that the crypto markets are entering a phase where patience is required.

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