Bitcoin has declined by 19% over the past three days. A flight from risk assets and uncertainty about the Fed’s bond buying program lent support to the US dollar.
Evergrande missed interest payments due Monday to at least two of its largest bank creditors. Many assets, including crypto, have come under pressure. As a result, price action bottomed out at $39,600.
The initial rebound was 5.9% to $41,963. A second wave of buying followed on Wednesday as the DXY dropped on remarks from Evergrande. The Chinese real estate giant said it will make the upcoming onshore yuan-denominated bond coupon payment. The news helped allay default fears.
Risk-sensitive currencies like the Australian dollar, New Zealand dollar and the Chinese yuan rebounded, while the safe-haven yen weakened slightly. Against this backdrop, upside in the BTCUSD pair accelerated to $42,360. Before the opening of the European session, BTC reached $42,749.
Dollar weakness has been modest as it remains to be seen whether the Chinese developer will be able to make a $85 mln coupon payment on an offshore dollar-denominated bond on Thursday.
Today’s Fed meeting adds uncertainty to the markets. After the meeting at 18:30 GMT, a press conference by Fed Chair Powell is scheduled to take place. Market participants expect Powell to go into the details of QE reduction. According to a CNBC poll of 32 respondents, the Fed will not announce tapering until November at the earliest. The regulator is expected to announce its $120 bln per month QE program in November and start to wind it down in December. Bond buying will decline by a pace of $15 bln per month.
Volatility on all exchanges can be expected from 18:00 to 19:00 GMT. The Fed’s taper is already priced in, so the adage “buy the rumor, sell the fact” may well apply today.