Bitcoin (BTC) fell to a low of $28,003 on Thursday before rising over the $29,000 support level, setting the pace for other major cryptocurrencies. Alternative cryptocurrencies otherwise referred to as altcoins, took a heavier hit, recording significant losses.
The price drop came after the market’s reaction to the minutes of the US Federal Reserve meeting held on May 3–4, which were released on Wednesday. The minutes revealed that the agency was willing to be flexible in its rate hikes and monetary tightening policies. Fed Reserve Chair Jerome Powell had previously stated that the Fed would take an “aggressive” attitude, which markets believed would lead to inflation.
The Fed raised the official U.S. interest rate by half a percentage point earlier in May. It plans to reduce the size of its balance sheet by $47.5 billion a month for three months and up to $95 billion a month starting in September, as previously reported.
In May, the U.S. Federal Reserve hiked the official interest rate by half a percentage point. Subsequently, it expects to shrink its balance sheet by $47.5 billion per month for three months and then by much more to $95 billion per month starting in September.
JPMorgan Chase claimed in a research report this week that bitcoin’s recent decline has left the digital token significantly below its fair price, providing it with a “significant upside” currently.
The bank stated bitcoin was undervalued by 28% and set a price target of $38,000 for the currency. Bitcoin plummeted to lows of $25,401 for the first time since December 2020 earlier this month, while stock markets were also battered – mostly owing to inflation fears.
“The past month’s crypto market correction looks more like capitulation relative to last January/February, and going forward, we see upside for Bitcoin and crypto markets more generally,” J.P. Morgan strategist Nikolaos Panigirtzoglou wrote.
“I think in the near term, we [crypto] will find our footing,” Grayscale Investments CEO Michael Sonnenshein stated recently in an interview. The asset manager believes the digital currency world’s rebound might arrive soon. Bitcoin’s current range of $28,000 to $30,000, according to some analysts, might be breached in the next few weeks, causing the asset to become more volatile.
“We caution that this current reduction in volatility risks turning into an explosion in the near term, potentially setting off momentum for a few days or weeks,” said Alex Kuptsikevich, a market analyst at FxPro.
Bitcoin traded at $29,569 at press time.
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