Bitcoin trails US Dollar as Fed holds rate steady

• Bitcoin and major altcoins briefly posted gains before retreating after the Federal Reserve held interest rates steady at 3.50-3.75% on Wednesday.
• Bitcoin's current performance against the US Dollar rally ranks among its weakest historically.
• Glassnode identified $69,000 as Bitcoin's key short-term holder cost basis, with substantial long-term holder supply between $83,000 and $86,000.

The Federal Reserve (Fed) kept its benchmark interest rate unchanged at 3.50% to 3.75% at its July meeting on Wednesday, in line with market expectations.

Minutes from the meeting showed that economic activity has been expanding at a solid pace despite elevated uncertainty. The central bank also noted that job gains have "kept pace with the workforce."

The policy vote came at 9-3, with Cleveland, Minneapolis and Dallas Fed Presidents dissenting in favor of a 25-basis-point rate increase.

Cryptocurrencies responded quickly to the decision, with major tokens briefly seeing gains following the announcement. Bitcoin (BTC) rose above $64,000 immediately but eased below a few hours later.

Bitcoin posts weakest performance against the Dollar

Glassnode earlier reported that BTC is trailing the US dollar, which has been rallying since May, with the top crypto showing one of its weakest performances against the USD.

The firm noted that Bitcoin has typically traded higher at this stage of previous dollar rallies since 2015. However, BTC's current performance ranks among the weakest, with only three of the 20 previous dollar rallies producing a worse performance at a comparable point. The underperformance could continue as the 30-year Treasury Yield rose above 5.20% on Wednesday.

Glassnode also highlighted pressure from the three-month Bitcoin futures basis, which reflects the yield available through cash-and-carry trades. The metric has remained below the two-year US Treasury yield since February.

According to Glassnode, this is only the second time on record in which the spread has remained negative for such an extended period. The previous comparable period ran from August 2022 to January 2023 and ended around the cycle low.

"When Treasuries out-yield the basis, the desks that supply leverage, depth and volume to this market have little reason to be here," Glassnode wrote, suggesting that weaker institutional participation could be weighing on market liquidity.

Bitcoin faces resistance at $69K, trades within 200-day moving average

Bitcoin is also trading within its largest cost-basis cluster, with roughly $62,000 to $68,000 representing the price range where more tokens last changed hands than anywhere else.

Glassnode highlighted an almost even split between short-term and long-term holders. Long-term holders are viewed as more patient and could provide support. On the other hand, short-term holders are more reactive, with many currently underwater and potentially more likely to sell during a rebound.

The firm identified the short-term holder cost basis around $69,000 as a key level for Bitcoin's next move. Above that, a larger supply wall from long-term holders sits between $83,000 and $86,000.

The report stated that Bitcoin's current downturn remains relatively shallow compared with previous bear markets. The cryptocurrency has stayed closer to its 200-day moving average than during prior downturns, while its drawdown from the all-time high is also less severe.

“A drawdown this gentle has not yet served the time its predecessors served, which argues for patience rather than for calling the low, particularly for anyone working from a four-year cycle map,” the firm noted.

Bitcoin is trading at $63,900, down 0.2% over the past 24 hours at the time of writing.