Bitcoin rally loses momentum as expectations for Fed shift eases

Bitcoin’s two-day resurgence ran out of steam after strong economic data dashed hopes for a relaxation in hawkish central bank policies.

Bitcoin, the largest digital coin by market value, dipped as much as 2.9 per cent on Wednesday to trade as low as $19,752, before trading little changed. That’s a reversal from the prior day’s trading, when Bitcoin moved above $20,000 to gain alongside the S&P 500 Index.

US stocks also slumped on Wednesday, dropping as much as 1.8 per cent after a two-day rally.

Ether sank as much as 3.3 per cent, while other so-called altcoins like Cardano and Solana dipped lower. Dogecoin sank as much as 3.8 per cent, a reversal from the prior session when the coin gain as much as 9.5 per cent.

Tesla CEO Elon Musk, an ardent supporter of the token, revived his $44bn bid for Twitter on Tuesday.

Economic data showed better-than-estimated growth for US service providers as well as companies’ strong demand for workers. Those figures could weigh on investors’ hopes for a more dovish Federal Reserve.

Stephane Ouellette, chief executive of FRNT Financial, a crypto brokerage firm, said that even though Bitcoin and the S&P 500 are both declining, Bitcoin’s move is relatively more muted.

“Typically BTC volatility is at least 3-4x higher than SPX volatility,” Ouellette wrote to Bloomberg News. Bitcoin’s drop is “the equivalent of a much smaller move in equities,” he added.