Bitcoin Prices Rise. The Fed’s Rates Decision Looms Large.

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Bitcoin
prices rose Wednesday but cryptocurrencies remained under pressure, with the largest digital assets trading on the lower end of their recent ranges ahead of a hotly anticipated decision on interest rates from the Federal Reserve.

The price of Bitcoin was up 1% over the past 24 hours to above $38,900, bouncing higher from a recent low around $37,700. The leading digital asset had fallen four out of the past five days as of Tuesday and was trading on the lower end of its recent range around $40,000. Bitcoin changed hands near $43,000 as recently as two weeks ago.

“Bitcoin is in wait-and-see mode for the Fed policy decision,” said Edward Moya, an analyst at broker Oanda. “Bitcoin is struggling to muster up a rally as investors remain cautious about buying risky assets. Bitcoin needs a fresh catalyst as sentiment on Wall Street remains fairly downbeat.”

Ether,
the second-largest crypto, also was higher. The token underpinning the Ethereum blockchain network rose less than 1% to below $2,850, up from Tuesday’s lows near $2,750. Ether topped $3,000 at the peak of last week’s trading.

Smaller cryptos, or “altcoins,” were mixed.

Luna
gained 2%,

Solana
retreated less than 1%, and

Cardano
was 2% higher. Memecoins—called that because they were initially intended as internet jokes rather than significant blockchain projects—were also rising, with

Dogecoin
and

Shiba Inu
both up less than 1%.

Cryptocurrencies, like stocks, were treading water as markets braced amid expectations that the Federal Reserve will announce a sizable rate hike of 50 basis points on Wednesday. The market has comfortably priced in a half-point hike from the Fed, though an even larger increase of 75 basis points seems to be within the realm of possibility. 

Investors will be closely monitoring Fed Chair Jerome Powell’s press conference and whether he appears to be more “hawkish” in telegraphing future rate hikes or the pace of quantitative tightening. Facing historically high inflation, the Fed is expected to raise rates many more times this year and next.

Bitcoin and other digital assets should in theory trade independently of mainstream financial markets, but they have proved vulnerable to macro pressures from monetary policy, which has an important influence on stocks.

Interest rate increases and as well as expectations that the Fed will reduce its bondholdings will raise the cost of borrowing, denting economic demand and causing bond yields to rise. When bond yields climb, investors are faced with math that proves tough for riskier assets like stocks and cryptos: Higher yields reduce the extra return relative to bonds that traders expect to get from taking riskier bets. 

That’s why the Fed’s interest rate decision looms large.

Despite the macro pressures, “Bitcoin markets have actually remained surprisingly robust, on a relative basis,” analysts at crypto market intelligence group Glassnode said in a note late Monday.

“Whilst the

S&P 500
and

Nasdaq
indexes traded to new local lows of the prevailing bearish trend, Bitcoin prices remain range-bound, and continue to lack any definitive macro momentum in either direction,” the Glassnode team said.

“With that said, correlations between Bitcoin and traditional markets remain near all-time-highs, and a broader perception of Bitcoin as a risk asset remains a significant headwind.”

Write to Jack Denton at jack.denton@dowjones.com