Crypto Market Tensions Rise Ahead of FOMC Meeting

• The crypto market is awaiting feedback from FOMC on the potential interest rate policy.
• Market sentiment remains bearish but macroeconomic headwinds may tilt sentiment.

The crypto market continues to see increased tension amid anticipations of the Federal Open Market Committee (FOMC) meeting. People are awaiting the results with the expectation of maintained interest rates as Bitcoin (BTC), the world’s largest digital asset surges above $60,000.

Possible Outcomes of FOMC Meeting

The FOMC is the division of the United States Federal Reserve responsible for overseeing open market operations and determining monetary policy. The FOMC holds scheduled meetings every year. The latest FOMC meeting, which begins today, is expected to last for two days during which the committee will discuss employment statistics, interest rates, and other important issues.

While the Fed is seeking a 2% rate going forward, the reported US inflation rate for March was about 3.5%. Since the beginning of the year, market expectations for rate cuts have drastically reduced. Talks of a six-rate cut fantasy scenario first surfaced in January. But as of this moment, sentiment points to only one rate drop by December.

Also, there are different opinions among some of the biggest Wall Street financial giants on the timing of the Fed’s first-rate reductions. A report from CNN reveals that JPMorgan and Goldman Sachs are projecting July, while Wells Fargo predicts it will happen in September.

However, Bank of America projects that the first cut will occur in December. Adding another perspective, some Fed policymakers anticipate a rate hike instead of a cut. Market analysts expect the Fed to keep interest rates rising for a longer time, due to severe inflation in the economy.

Others are concerned that this might lead to stagflation if GDP growth slows. According to financial expert Kurt S. Altrichter, the US Fed is now focusing on keeping interest rates constant or cutting them. He went on to say that if the Fed maintains interest rates steady, then in this scenario, Equities should embrace the Fed’s pushback on rate hikes.

WHAT’S EXPECTED AT TOMORROW’S FOMC MEETING?

There is no change to inflation language, and J-Powell is focused on 2 policy paths: rates remain steady or cut (dismissing any chances of hikes). If this happens, markets will maintain expectations for a September cut at roughly 50%…

— Kurt S. Altrichter, CRPS® (@kurtsaltrichter) April 30, 2024

While this is not a major bullish catalyst, Altrichter noted that it should support stocks. He claims Value and cyclical factors should drive stock prices up, and predicts the SPX to climb by less than 1%.

“Treasury yields should drop less than 10 basis points. The dollar should be relatively muted or drop slightly. Commodities should see a small bounce,” he added.

Possible Reaction from the Crypto Market

So far, Bitcoin experienced increased selling pressure a day before the FOMC meeting, as investors shifted away from risks. The latest Marketcap data shows that Bitcoin is trading at $56,904, demonstrating a 7.6% decrease in the past day.

While short-term pressures may persist if interest rates and inflation stay high, this may not necessarily affect Bitcoin in the medium to long term. In the past 24 hours, the trading volume has increased by 61.5% to $45.5 billion. This increase indicates a bullish sentiment towards the leading digital assets as investors await its next critical support level.

Echoing earlier coverage by Crypto News Flash, popular market analyst Bluntz predicted that BTC will hit a new all-time high within the next two weeks.