• The Federal Reserve struck a dovish tone at Wednesday’s FOMC meeting.
  • The recovery of the Japanese yen, along with dropping oil and commodity prices, are also good signs for risk-on assets.
  • Bitcoin is likely to bottom soon and resume its uptrend, a crypto hedge fund told DL News.

It’s been a rocky few weeks for Bitcoin, but things are starting to look up on the macro front, according to market observers.

Some viewed Federal Reserve chair Jerome Powell tone on Wednesday as dovish. The official said that interest rates were unlikely to rise anytime soon despite worrying inflation numbers.

“Stars are aligning in my mind for a cooling off of the ‘inflation trade,’” Quinn Thompson, founder of crypto hedge fund Lekker Capital, told DL News.

“With Bitcoin now down over 20% from all-time highs and most digital assets down much worse, I believe we are at or very close to a tradable local bottom,” he added.

If it had raised interest rates, the US central bank would have made it more expensive for people and businesses to borrow money. Risk-on investments like Bitcoin tend to perform poorly in such conditions, while the US dollar tends to get stronger.

Not only did the Fed dismiss the idea of raising rates, it announced that it will be ending quantitative tightening — a policy that decreases the amount of money in the financial system — sooner than expected.

“We got something pretty close to the best-case” scenario, Noelle Acheson, former head of market insights at Genesis, wrote in her “Crypto is Macro Now” newsletter.

Meanwhile the Japanese yen, which has lost 18% against the US dollar since the beginning of the year, also seems to be recovering — a development that Thompson attributed to US Treasury Janet Yellen meeting with Japanese officials.

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And recent inflation issues may disappear thanks to a drop in oil and commodity prices, he said.

“To me, these are the signals that make it clear there is coordinated action to get yields down and the dollar weaker,” he said.

Thompson had previously warned that tightening liquidity conditions threatened to trigger a liquidity crisis akin to the regional bank collapse last spring, or the UK gilt crisis in 2022.

Tom Carreras is a markets correspondent at DL News. Got a tip about Bitcoin and the Federal Reserve? Reach out at tcarreras@dlnews.com

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