The value of bitcoin and ethereum increased slightly in the early hours of Tuesday, as market participants positioned themselves for a possible "buy the news" event that might follow a crucial US Federal Reserve (Fed) meeting today.
BTC has dropped 3% in the last 24 hours, trading at a price of USD 47,250, while ETH has fallen roughly 5% over the same period to $3,815 as of 11:00 UTC today.
The current prices signify a resurgence from early hours lows of USD 46,214 for BTC and USD 3,685 for ETH. On Tuesday evening, BTC topped at $47,500 while ETH surpassed $3,820 during the Asian trading session.
Meanwhile, the Standard & Poor's 500 stock index future was down 0.3 percent to USD 4,646 in afternoon trading.
The actions today occur as the market is preparing for a Federal Reserve meeting later in the day, which is expected to offer additional information on the Fed's future intentions. The session concludes on Wednesday afternoon, with a press conference from Chairman Powell.
The Federal Open Market Committee is expected to signal that it will start raising interest rates again in 2018, but uncertainty remains about how quickly the central bank will scale back its massive asset purchase program, which has come to be known as 'money printing.'
The uncertainty about the Federal Reserve's intentions has also increased with the emergence of a new Omicron strain of coronavirus, which investors fear might dampen growth.
Traders in the cryptocurrency market were largely optimistic ahead of today's Federal Reserve meeting, with Will Clemente, a BTC analyst at mining firm Blockware Solutions, noting that the meeting is practically a fait accompli.
“[…] anyone who is bearish BTC or wanted to risk-off leading up to [the Fed meeting] has been and will have already done so by then. Have to wonder how many sellers will be left + how much capital is on the sidelines,” Clemente wrote, while in a separate tweet calling it a potential “buy the news” event.
Many, including crypto hedge fund Three Arrows Capital CEO Zhu Su, pointed to bullish exchange data from bitcoin broker Bitfinex, which revealed a concentration of buy orders just below current bitcoin prices.
Some people felt that the bearish mood in the crypto community indicated a potential for a recovery rally following the summit.
Following the idea that the market will always seek to inflict the most agony on market participants, Gemini's Asia Head of Business Development, Eugene Ng, predicted that there is a possibility that the market will rise now because traders anticipate it the least.
Meanwhile, commenting on the market trends that have already occurred in advance of today's meeting, Quantum Economics CEO Mati Greenspan suggested in a newsletter that conventional markets appeared to be completely unperturbed by all the talk about tapering, with equities near all-time highs and oil prices north of $70 per barrel.
Greenspan commented that not many retail investors are focused on the Fed’s moves.
The Federal Reserve has previously stated that it will gradually reduce its asset purchases on a monthly basis beginning in November. The Federal Reserve announced in early November that it would cut the overall asset purchases by USD 15 billion each month going forward, from previously buying up USD 80 billion in Treasuries and USD 40 billion in mortgage-backed securities every month.
The belief that the Federal Reserve's asset purchases, also known as quantitative easing (QE), are assisting to support prices of assets such as equities and digital assets like bitcoin and ethereum is widespread among market participants. As a result, any drops in these purchases are expected to cause sell-offs in both conventional markets and crypto markets.