- Cryptocurrencies rallied broadly on Wednesday, buoyed by a string of supportive news.
- Dogecoin gave up some of Tuesday's gains after Elon Musk said Tesla would take it as payment for some merchandise.
- Avax soared 15% after a tie-up with Circle to launch the USDC stablecoin on the avalanche network.
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Cryptocurrencies rallied on Wednesday, with bitcoin edging back towards $50,000, as investors delved back into the market after some of the price weakness caused by caution around the outcome of the Federal Reserve's policy meeting.
Bitcoin was last up 2.3% to around $48,311 on Wednesday at 06:25 am ET, while ether climbed 1.6%, according to CoinGecko. Dogecoin eased 6%, but still held close to its highest since the start of December, after Tuesday's 30% rally in the wake of Tesla chief executive Elon Musk saying his company would start accepting payment in the meme cryptocurrency for some merchandise.
Over the last week however, the crypto market has been under pressure. Bitcoin has lost 4.4%, while ether has lost 10% and the solana blockchain's sol token has fallen by 12%, as investors prepared for a potentially hawkish outlook from Fed policymakers after their two-day meeting that will conclude on Wednesday. Right now, the central bank could signal that it intends to wrap up its monthly bond purchases more quickly than many expect, or even give an indication of when US interest rates might rise.
"If the Federal Reserve decides to do either of these things, that will negatively impact cryptocurrency," Marcus Sotiriou, Analyst at UK based and Canada listed digital asset broker GlobalBlock said.
Nevertheless, the feeling among market-watchers is investors are still positive on cryptocurrencies over the longer-term, particularly those attached to blockchains with real-use cases.
"This long-term value proposition for bitcoin disrupting gold as an emerging store of value and for smart contract-platform such as ethereum, solana and avalanche building the settlement layers for the user-owned internet services — has started to resonate with value investors since March 2020 as they are looking to preserve their wealth, beat inflation and invest in innovation." 21 Shares said in a note late Tuesday.
Avalanche's token avax rose by 16%, making it one of the strongest performers of the day, after the company announced a tie-up with stablecoin platform Circle, whose USDC coin will launch on the network.
"Further, by enabling USDC to be minted natively on avalanche, Circle is removing the need to bridge existing USDC tokens from ethereum," avalanche founder Emin Gun Sirer wrote in a Twitter post on Tuesday.
Like the ethereum network, avalanche offers decentralized finance options. But it's generally a cheaper alternative. The average "gas fee" - or cost of a transaction - on the avalanche network was running at around $0.0048-0.0578 on Wednesday, compared with around $3.66-5.13 on the ethereum network, according to CoinTool.
Metaverse token sand was up by around 2% after sportswear company Adidas said it had purchased a virtual plot of land on The Sandbox and released an NFT collection for the gaming world's users.