By Yasin Ebrahim

Investing.com – has followed traditional risk assets like stocks lower recently amid jitters about impending action from the Federal Reserve, but when sentiment on risk assets flips positive BTC will lead the recovery.

The price of $48,375 rose by 3.7%

“The [sell-off]Some are asking whether bitcoin and other cryptocurrency can continue to be corrected in the same way as equity markets. [at a time]”When the Fed, other central banks, are becoming less accommodative,” Seamus Donoghue of Metaco’s VP Strategic Alliances, stated in a recent interview with Investing.com before Wednesday’s Federal Reserve decision.

On Wednesday, the Federal Reserve will announce that they are reducing bond purchase pace and will forecast an earlier path to increasing rates.

Years of Fed monetary policy ease have added liquidity to the markets, including cryptocurrency. This helped asset valuations.

Officials will not be able to remove monetary policy flexibility from the Fed or other central banks for too long, as they are afraid of risk asset selloffs.

“There is so much leverage not just in crypto markets but more broadly in the system that any correction in risk assets will bring the central banks back to the table to ease again because I don’t think the market can handle any real correction,”  Donoghue added.

“Crypto will be the leader in any correction of broader risk assets.”

Bitcoin’s move lower recently in tandem with traditional risk assets like stocks has left some questioning why investors didn’t turn to the BTC, which many have likened to ‘Gold 2.0,’ for protection.

However, Bitcoin seems to have been a victim to its success. The influx of institutional investors into the space is one of the main reasons why the crypto has a higher correlation with stocks and other traditional assets.

“When institutional investors are looking to raise liquidity, they sell whatever is most liquid first, making bitcoin much more correlated than three or four years ago when there was very little institutional presence and the asset was uncorrelated with traditional asset classes,” according to Donoghue.

Looking at the underlying plumbing in the bitcoin network, there also appears reason for optimism as the amount of BTC moving onto exchanges – typically a bearish indicator – is well below the prior major selloff during May to July, when BTC plunged to below $30,000 from nearly $60,000.

“In May-July, exchanges saw an enormous influx of some +168k BTC on net over a span of three months. In the current Oct-Dec correction, we have seen a total of 49k BTC flow out of exchanges, making for quite the contrast,” Glassnode said in its weekly report.