Bitcoin and other cryptocurrencies faced a decline in value on Wednesday as broader market sentiment took a hit following disappointing results from major tech companies. Investors are now turning their attention to the Federal Reserve's decision, which is expected later in the day, as it could be the next catalyst for the crypto market.
Over the past 24 hours, the price of Bitcoin has fallen by 1.5% to reach $42,850. This drop comes after the cryptocurrency briefly traded close to $44,000 earlier. While Bitcoin managed to reclaim the psychologically important $40,000 level earlier this week, it still remains well below its recent peak of over $48,000. This peak was reached amid the trading frenzy that followed the approval of spot Bitcoin exchange-traded funds (ETFs).
Analysts, who have observed a declining hype surrounding Bitcoin ETFs as the market stabilizes, are now looking for other factors that could drive the crypto market forward. This week has been eventful in terms of potential catalysts, with investor focus shifting beyond cryptocurrencies. Bitcoin has a tendency to follow the stock market when there are no major crypto-related developments. It moves in tandem with indices like the Dow Jones Industrial Average and S&P 500.
This week, the focus of investors is on the earnings reports of major tech companies. Microsoft and Alphabet have already released their latest results, which investors are currently digesting. Additionally, the Federal Reserve's monetary policy decision is expected later today, with Fed Chairman Jerome Powell's press conference being closely watched. Expectations have been shifting regarding when the central bank may start cutting interest rates, making Powell's remarks highly influential.
The direction of interest rates is likely to have a significant impact on cryptocurrencies, just like stocks. Digital assets are sensitive to changes in borrowing costs. On Friday, market participants will turn their attention to the U.S. jobs report for January, another important economic indicator that could affect rate expectations.
Apart from Bitcoin, Ether, the second-largest cryptocurrency, experienced a minor gain of less than 1%, reaching $2,320. Smaller tokens exhibited mixed performance, with Cardano declining by 4% and Polygon rising by 2%. Memecoins, on the other hand, faced losses, with both Dogecoin and Shiba Inu declining by 2%.