The decision, along with Federal Reserve Chair Jerome Powell’s subsequent press conference at 2:30 PM ET, is expected to have an important effect on financial markets, particularly the cryptocurrency sector.
According to a study named “Monetary policy shocks and Bitcoin prices’, Bitcoin and other cryptocurrencies have historically responded sharply to FOMC meetings as macroeconomic policies influence investor sentiment and liquidity.
In December 2021, for example, Bitcoin lost nearly 10% after the Fed said it would take a more aggressive approach to rate hikes.
In November 2022, by contrast, Bitcoin gained back above $17,000 after a softer-than-expected rate increase. A pause in rate hikes usually has a positive implication for risk assets such as Bitcoin, although uncertainty around Powell’s comments had traders on the back foot.
Analysts in the crypto market are divided on what the FOMC meeting results would bring. In anticipation of the Fed’s decision, over the last few weeks, Bitcoin has seen some heavy price action and major market volatility.
A key macro question — raised by BitMEX co-founder Arthur Hayes — is whether the European Union’s (EU) re-armament, financed with printed euros, can neutralize the near-term fiscal negative impulse in the U.S.
He says, “Will the re-arming of the EU paid for with printed EUR overwhelm the near-term -ve fiscal impulse of the US? That’s the big macro question. If yes, correction over, if no, hold on to your butts.”
Crypto analyst Michael van de Poppe, predicts timeframes framing a rate cut will not materialize in the current data in front of the FOMC decision but an eagerly awaited direction on the Federal Reserve’s policy path.
“I don’t think we’ll see a rate cut, but if the trajectory is to quit QT or to provide QE / rate cuts in the next 2-3 months, I think we’ll see a strong move on Bitcoin & Altcoins,” Van de Poppe posted on X.
He also pointed out that “$DXY already collapsed”. This means that the collapse in the U.S. Dollar Index indicates that the global cryptocurrency market has entered a favorable phase where investors might be more likely to invest in risk assets like Bitcoin and Ethereum.
At press time, Bitcoin is trading at $83,627.58, up by nearly 2% in the last 24 hours while Ethereum sits at $2,002.77, an uptick of nearly 6% in the last day.
