Bitcoin lost steam on Monday, teetering above and below $28,000 as investors appeared ready to burrow down ahead of the Federal Reserve’s next interest rate decision on Wednesday.
The top cryptocurrency by market capitalization was currently trading at around $27,745, down nearly 1% from 24 hours ago. Bitcoin surpassed $28,400 early Monday (UTC), just hours after the US Federal Reserve announced a collaboration with five other major central banks to assure a stable flow of the US dollar, the world’s largest reserve currency, across the global financial system.
“Trust in the fiat banking system is rapidly fading, and the only alternative, portable safe haven is bitcoin,” stated Stefan Rust, CEO of data aggregator Truflation, in an email to CoinDesk. “The quick spike in the price of bitcoin is a symptom of concern that additional issues lurk in the banking sector, particularly since Credit Suisse’s demise.”
“Bank runs are also making it impossible to get gold,” Rust noted, “while fear of inflation and hyperinflation in some nations is all driving a flight to Bitcoin.”
Bitcoin’s price has risen in recent days as the threat of a global banking meltdown has faded and investor hopes have risen for a more dovish Fed policy, possibly even suspending its year-long streak of interest rate hikes at its meeting starting Tuesday, though a 25 basis point increase appears most likely after last week’s only mildly improved inflation report.
“That’s definitely the most plausible,” said Tom Shaughnessy, co-founder of cryptocurrency research platform Delphi Digital, on CoinDesk TV’s “First Mover” program.
According to CoinDesk Managing Editor Markets Asia Omkar Godbole, the Fed’s announcement on Sunday that it would increase the frequency of its dollar swap lines with the European Central Bank, the Bank of Japan, the Bank of England, the Bank of Canada, and the Swiss National Bank from weekly to daily aims to calm exchange volatility and avoid strains in the supply of credit to households and businesses worldwide. The most valuable cryptocurrency in terms of market capitalization is widely regarded as a hedge against the banking system.
Ether, the second largest cryptocurrency by market capitalization, was currently trading at around $1,731, down 3% from the same time on Sunday. Other cryptos in the top 25 by market cap were mainly down, with APT, the token of layer 1 network Aptos, and MATIC, the native crypto of layer 2 platform Polygon, both down more than 8% and 6%, respectively. SOL, the Solana blockchain coin, increased marginally.