The Bitcoin and cryptocurrency markets are holding their breath in anticipation of the week ahead, especially due to a single key event: the Federal Reserve interest rate decision, followed by the Federal Open Market Committee press conference hosted by Fed Chairman Jerome Powell. This looming decision has the potential to ripple across all financial markets, from Wall Street to Bitcoin and cryptocurrency’s decentralized corridors.
Other events this week that could potentially have an impact on the market are fairly rare. Only last week’s approval of the liquidation of FTX holdings (up to $100 million, and in some cases $200 million per week) may be newsworthy. However, since the liquidation does not require any announcement, there will be no big headlines.
Wednesday’s Federal Open Market Committee (FOMC) and interest rate decision
The Federal Open Market Committee (FOMC) is scheduled to hold a meeting on September 20, and market participants are highly optimistic about announcing a pause in interest rate increases. According to the FedWatch tool, current market data suggests that there is a 98-99% chance that interest rates will remain stable.
If this expectation comes true, it would mean that the Fed will maintain the benchmark federal funds target range between 5.25% and 5.50%, the highest level since January 2001. After the rate decision, markets will be closely watching Federal Reserve Chairman Jerome Powell’s subsequent speech for any nuanced insights into future monetary policy.
The FOMC is also expected to release new forecasts for interest rates and economic growth, often referred to as a “dot plot.” The launch has the potential to be the most significant market driver of the entire event. The question is: How do we assess the U.S. economic situation? When did the first rate cut happen?
With inflation still well above target and recent data showing CPI rising 0.5% year-on-year (from 3.2% to 3.7%), the second consecutive rise (overall CPI bottomed out at 3.0% in June), people are increasingly Expectations are growing that the Federal Reserve may adopt a hawkish tone, leaving the door open to the possibility of raising interest rates in the coming months.
Notably, markets are also concerned about the unusually large gap between U.S. GDP and GDI (gross domestic income), which is the largest on record. The situation is strikingly similar to that before the 2008 financial crisis, raising concerns and speculation about the health of the U.S. economy and the global economic landscape.
The plot gets more complicated!
After revisions, we now have the largest gap on record between GDP and GDI.
When was the last time we had a similar gap?
— AndreasStenoLarsen (@AndreasSteno) September 18, 2023
Bitcoin Price Considerations
As always, cryptocurrency investors remain highly vigilant about any macroeconomic events that may impact the digital asset market. Overall sentiment suggests that Bitcoin was significantly affected by the outcome of the FOMC meeting and Powell’s subsequent comments.
Well-known market analysts have weighing About Bitcoin price trends. Material Indicators, a well-known trading analysis account, tweeted: “This is Bitcoin’s first green weekly candle close in 5 weeks… The Federal Open Market Committee (FOMC) announced a rate hike on Wednesday, so expect some whale play to break this situation.”
Similarly, another influential trader, MacroCRG, warn Possible volatility following the FOMC meeting, while emphasizing the overall positive but volatile outlook for Bitcoin. “Yes, backwardation is increasing + funding is decreasing. It actually looks good. But it’s Monday (Monday’s move is not credible) and we got news from the FOMC on Wednesday,” he said.
Michael van de Poppe is a highly regarded analyst. tip Bitcoin is currently in a bullish position above the 200-week EMA (exponential moving average), likening market conditions to the digital currency’s 2015/2016 price cycle.
In addition, the market is also paying close attention to the performance of the US dollar (DXY). Interestingly, hedge funds are net-long the U.S. dollar for the first time since March. Given the negative correlation between the U.S. dollar and Bitcoin, a rise in the U.S. dollar index could lead to selling pressure on Bitcoin.
However, there is still something special about the current situation. The recent rally in the U.S. dollar and the related repositioning by hedge funds has been largely driven by weakness in the euro following the ECB decision.Therefore, on smaller time frames, Bitcoin does not exhibit a negative correlation with USD appreciation because detailed Written by analyst Furkan Yildirim.
As of press time, BTC has surged nearly 2% in the past 4 hours, trading at $27,136.
Featured image via Matt Howard, chart via TradingView.com