Today’s Fed (Fed) FOMC meeting may determine the fate of cryptocurrencies and Bitcoin in the coming weeks and months. As NewsBTC has reported in recent weeks, financial markets around the world are focusing on every word of the Fed to predict future policies.
At present, there is no doubt that the Fed will raise interest rates today 75 basis points (bps), which will be the fourth consecutive rate hike. However, for the next meeting in December and January, there are differences in the futures market .
For this regard, the main focus of today's meeting will be signals from the Federal Reserve that the pace of rate hikes may slow. Currently, the market assumes the probability of raising interest rates by 75 basis points in December is 50%.
Hawkish or dove?
Like previous meetings, Fed Chairman Jerome Powell (Jerome Powell ) may not want to send a signal that a slowdown in rate hikes indicates an early end of austerity policy or a decline in peak interest rates. The market could link the dovish signal to a slowdown in December rate hikes as low as 50 basis points.
Pepperstone Research Director Chris Weston wrote in a report to clients:
In the Fed's view, putting the United States in recession is still less pressure than not solving the deep-rooted price.
It seems unlikely that the Fed wants to promote a positive response to risky assets, and in my opinion, the risks faced by the market tend to be hawkish reactions—stocks rise, bond yields and lower dollar.
So, Powell may overturn the FOMC's "pivot" narrative by suggesting higher peak interest rates. It is speculated that Powell wants to buy time, too.
What is quite critical may be the next CPI data to be released on November 10 and the October unemployment rate to be released on November 4. If the Consumer Price Index (CPI) drops, it may indicate that Powell’s policy is to work, it just takes time. As the U.S. job market continues to look relatively strong, Powell may have time.
OANDA Senior analyst Edward Moya told CNBC:
The labor market will cool down, but it is not as fast as people think, and this should slow the Fed down its rate hikes—probably not in December, but may be at its February meeting.
What scenarios have appeared in Bitcoin and cryptocurrencies?
To predict possible reactions to Bitcoin and crypto markets, it would be helpful to see how the Fed's rate hike in the past will perform. Historically, BTC prices fluctuated too much before and after the announcement.
BTC fell 5% in a few minutes during the last rate hike in September, and then a staggering rebound. The impact of
on the US dollar is particularly important. In 2022, Bitcoin showed a strong negative correlation with the dollar index (DXY). When DXY rises, Bitcoin falls and vice versa. Bitcoin’s rebound last week was triggered by weak performance by the dollar index (DXY) and suffered a heavy blow.
However, after falling to 109 points last Wednesday, DXY rebounded to a high of 111.689 points. The U.S. dollar index showed some weakness in the face of the Fed's decision on Wednesday morning and once again fell against major currencies from its weekly highs.
DXY showed weakness before FOMC meeting
Meanwhile, gold rose more than 1% on Tuesday as the dollar showed early signs of weakness. Bitcoin can follow this trend.
So what will happen today?
In short, there are two situations in Bitcoin and cryptocurrencies today. If the Fed continues to be hawkish, there is no sign of slowing down the pace of rate hikes, and fails to play a lower peak interest rate, the price of Bitcoin is at risk of falling below $20,000 again.
However, if the Fed comments on the "center of gravity", even if it only suggests a slowdown in the pace of rate hikes, the beginning of a new round of rebound may be right in front of you.
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