Bitcoin extends correction ahead of FOMC meeting

Uncertainty is mounting in the crypto market ahead of this week’s Federal Open Market Committee (FOMC) meeting. Data from CoinGecko shows that Bitcoin (BTC) hit a low of $61,500 on Tuesday before bouncing back above $62,000 during the day. At the time of writing, BTC is trading at around $62,800, almost 15% lower than its record high of $73,700 set last Thursday.

All eyes are set on the Fed’s interest rate decision in the next hours, which could affect Bitcoin’s price action. According to updated estimates from the CME FedWatch Tool, there is a 99% likelihood that interest rates will remain between 525-550 basis points, leaving only a 1% chance of a rate cut.

As compared to last month, positive expectations of a rate cut have declined. Based on CME data from February 16, 10% of economists expect the Fed to lower rates. It could be related to the recent CPI report released earlier this month. According to the US Labor Department, core inflation in February reached 3.2%, above the 3.1% expectation.

As Bitcoin loses steam, the crypto market is rattled with most altcoins in correction mode. Ethereum has fallen below 13% following the activation of the network’s Dencun upgrade, according to CoinGecko’s data.

While the broader market undergoes a correction, some Solana memecoins are defying the trend with impressive gains. CoinGecko data shows the Book of Meme (BOME) surging 32% in the past 24 hours. This follows a successful presale on Monday that reached $100 million, contributing to Solana’s recent rise as the fourth-largest cryptocurrency by market cap.

A pullback is a sign of healthy price action

Market analyst Bloodgood sees the Bitcoin correction as a positive sign to clear out some of the unrealistic exuberance and get the market back on a more stable growth track. The current price drop in the lead-up to the halving event, according to him, is not surprising.

“Bull markets tend to give a few deeper corrections – deep enough to cleanse some of the overleveraged euphoria, rather than just 5% wicks that get bought up immediately – and we’re seeing one of those now,” noted Bloodgood in his latest report. “We’ve got a month to go until the Bitcoin halving, so a pre-halving dip would be far from unexpected given how BTC performed recently.”

Meanwhile, analysts at exchange Bitfinex suggested that the crypto market is now in a period of adjustment after the highs and lows. Prices may fluctuate as investors assess the new situation and decide where the value should settle.

“In light of bitcoin’s recent all-time high and subsequent correction, we anticipate a period of market recalibration as investors seek equilibrium amidst unprecedented inflows into spot bitcoin ETFs,” noted the analysts.

Following the January downturn and the recent pre-halving rally, Bitcoin may be entering the third phase of the halving cycle: the pre-halving retrace.

Crypto trader Rekt Capital previously suggested that if history repeats, this retrace period could last several weeks and result in a 20% price decline for Bitcoin, similar to the last halving. However, he also noted that this price dip is likely to trigger another round of buying.