(Bloomberg) — Bitcoin has lost its bullish momentum ahead of a key meeting Wednesday by the U.S. central bank, with the largest digital asset by market value lagging the gains posted by smaller cryptocurrencies such as Ether and XRP.
Most Read from Bloomberg
The original digital currency was little changed at around $28,000 for a third day, while Ether gained about 3% and XRP jumped more than 12%. Bitcoin has surged almost 40% since March 10, as turmoil in the global banking system prompted some investors to turn to what has long been promoted as an alternative. All eyes in the digital asset market are on a decision by the Federal Reserve on interest rates on Wednesday.
“The recent move shows an example of how reflexive crypto markets can get as narratives quickly fade in and out of sight for short-term traders,” said Chris Newhouse, a crypto derivatives trader at digital-asset firm GSR. “The impulsive interest to put on a trade when price volatility is high can bite people quickly, as the easy availability of leverage can quickly drive prices in opposite directions if traders are wrong.”
Federal Reserve officials face their biggest challenge in months as they decide whether to keep raising interest rates to battle inflation or take a pause amid the turmoil fueled by recent bank failures. Before Silicon Valley Bank’s failure this month, the US central bank policymakers were forecast to raise rates by as much as 50 basis points. Fed watchers expect a increase of half that amount.
“If they do cede to market pricing and start forecasting cuts this year, equities and crypto will certainly continue their rally,” digital-asset trading firm QCP Capital wrote in its Telegram channel on Tuesday. If the Fed is aggressive in raising rates, “then we will likely see a premature top for this Bitcoin rally tomorrow.”
Elsewhere, the price of XRP rose as much as 14%, the fifth increase in six days. Supporters of the token have cited optimism over a potential outcome in the lawsuit between the US Securities and Exchange Commission and Ripple Labs Inc., the company behind the token.
Some Bitcoin investors were looking at $30,000 milestone prior to Tuesday, as the “digital gold” narrative became stronger for Bitcoin.
“Whatever the Fed does, crypto could do its own thing entirely,” crypto prime brokerage B2C2 wrote in its newsletter on Tuesday. “We have seen plenty taking profit at current levels, which makes sense as the 28,500/28,800 is a historically important area.