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Bitcoin Jumps Above $24,000 on Dovish FOMC Comments CryptoCurrencies and ICOs

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Bitcoin validated its strong 2023 performance by posting its best January since 2013, but it didn’t stop there as it also managed to cross above the crucial $24,000 resistance region for the first time since last August on Thursday. The main factor behind those gains was the slowdown in the Fed’s tightening pace, coupled with dovish comments from Fed Chairman Jerome Powell. Technically, many cryptocurrencies are now trading at overbought levels, as the bullish forces do not appear to be abating, could this trigger a downward correction?

The Fed boosts risky assets

After a devastating 2022, depressed cryptocurrency prices are not only showing signs of recovery but have also posted significant gains fueled largely by an overall improvement in risk sentiment. The latest FOMC meeting reinforced this trend, as policy makers declared for the first time that the disinflation process has begun. Stock markets rallied on those dovish comments, dragging crypto higher as market participants increased their bets on a late-2023 rate cut in contrast to what the Fed has repeatedly stated.

Furthermore, this remarkable positivity surrounding digital currencies is also reflected in other indicators, such as the famous Crypto Fear & Greed Index, which reached its highest level since November 2021, when Bitcoin was trading near its all-time highs. Meanwhile, the so-called short-squeeze phenomenon has also contributed to the latest rally in crypto markets, with more and more short sellers rushing to cover their positions by buying on the spot market to avoid further losses. However, in 2023, ultra-risky assets like NFTs or meme stocks have also made a comeback, so it doesn’t seem like investors are betting solely on cryptocurrency-related fundamentals, but most likely the heightened optimism has raised all ships.

Cryptocurrencies regain the confidence of institutional investors, but why?

To be sure, the cryptocurrency bear market in 2022 exposed flaws and flaws in various cryptocurrency projects and business models, significantly affecting the reliability of the broader crypto space. Data from a US blockchain analytics firm suggests that 2022 was the worst year ever for cryptocurrency fraud, as hackers stole nearly $3.8 billion despite growing security nets said to implemented cryptocurrency exchanges.

Amid all this turbulence and in the absence of any significant regulatory intervention, institutional investors have increased their outflows in cryptocurrency-related investment products by more than $117 million over the past week, which is the largest weekly increase since last July, according to data from Coinshares. . Therefore, someone might argue that only a moderate rally without any clear catalyst was needed for investors to reaffirm their confidence in the crypto space.

Bitcoin reached a crucial technical region

BTCUSD (Bitcoin) has been in a steady uptrend since early 2023, hitting a fresh 5-month high of $24,252 on Thursday before experiencing a minor pullback. However, the king of cryptocurrencies is currently at a crucial technical crossroads.

On one hand, the 50-day SMA is dangerously close to the 200-day SMA, where a possible gold cross could accelerate the ongoing rally. Meanwhile, the price has also reached overbought levels, opening the door for a significant pullback in the near future.

In the upside scenario, if the price breaches its recent high, further advances at the August peak of $25,200 could cease. Higher, the bulls could target the support at $27,960, which could now act as resistance.

On the other hand, if Bitcoin pulls back to the downside, initial support could be found at the recent low of $22,300 before the $20,385 hurdle is tested.

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