FOMC Preview: Bitcoin and Crypto’s Fate Tied To Fed Rate Move
March 19 2024 - 8:00AM
NEWSBTC
In the lead-up to the Federal Open Market Committee (FOMC) meeting
scheduled for Wednesday, March 20, the Bitcoin and crypto market is
experiencing a severe downtrend. BTC price has plunged roughly -10%
in the past two days, and Ethereum (ETH) is down -12% in the same
period. The anticipation surrounding the Fed’s stance on interest
rates has heightened in the wake of recent economic indicators,
including unexpected spikes in the US Consumer Price Index
(CPI) and Producer Price Index (PPI), stirring volatility across
markets, including digital assets. The consensus, with a 99%
probability according to the CME FedWatch tool, suggests interest
rates will hold steady. Nonetheless, the spotlight turns to the
Fed’s dot plot, a graphical representation of the individual
members’ expectations for future interest rates, which could
provide crucial insights into the monetary policy outlook for the
coming months and years. Anna Wong, Chief US Economist for
Bloomberg, remarked via X (formerly Twitter), “Another reason why
FOMC [is] not ready to cut: members not yet of broad agreement of
that need. Here’s visualizing the dispersion of FOMC views with the
help of our new weekly NLP Fed spectrometer. “ Another reason why
FOMC not ready to cut: members not yet of broad agreement of that
need. Here’s visualizing the dispersion of FOMC views with the help
of our new weekly NLP Fed spectrometer. (Interactive version at
@TheTerminal BECO models —> Fedspeak —> spectrometer)
pic.twitter.com/Kney89BERM — Anna Wong (@AnnaEconomist) March 19,
2024 How Will Bitcoin And Crypto React? Macro analyst Ted,
expressing his perspective on X, underscores the nuanced
relationship between macroeconomic trends and the crypto market at
the moment. Ted elucidated that spot Bitcoin ETF flows have taken
the backseat while macro factors came to the foreground. He stated
via X, “If BTC is to be considered digital gold, it’s expected to
mirror gold’s market movements, albeit with a higher degree of
volatility. In the current climate, with the market bracing for the
Fed’s upcoming meeting, macroeconomic factors momentarily take
precedence, driven by recent developments in PPI and CPI figures.”
He further speculates that “Despite the eventual remarks from [Fed
Chair] Powell, the market has already adopted a hawkish stance in
anticipation of a ‘higher for longer’ interest rate scenario.”
Related Reading: Japan’s $1.5 Trillion Pension Fund To Assess
Bitcoin For Diversification Michaël van de Poppe, a noted figure in
the crypto analysis domain, provided his insights on the recent
downward price movement of Bitcoin via X, citing a mix of factors
including the anticipation of the FOMC meeting and significant
capital outflows from Grayscale‘s Bitcoin Trust. Van de Poppe
advises, “It’s typically in these pre-FOMC periods, perceived as
risk-off intervals, that the savvy investor finds opportunities to
‘buy the dip’.” In a reflection of market sentiment adjustments,
analyst @10delta on X pointed out the strategic positioning of
investors in anticipation of the Fed’s rate decisions. “The market
is currently pricing in a reversal to the November ’23 interest
rate levels, a clear indication that investors are adjusting their
expectations based on the Fed’s potential pivot signaled in the
previous dot plot,” he noted. Accordingly, he argues that the FOMC
& dot plot will be a “buy the news” event as the market
expectations are being properly adjusted. “The macro worries […]
should dissipate & crypto idiosyncratic bullish factors, such
as the ETF inflows […] as well as the BTC halving take hold. All
considered I think there’s a good R/R for ‘buying the dip’ heading
into the March 20 event,” the analyst added. Goldman Sachs Predicts
(Only) 3 Rate Cuts This Year Goldman Sachs Research recently
provided a detailed analysis in their March FOMC Preview. The
report highlights the nuanced balance the Fed seeks to achieve
between controlling inflation and supporting economic growth.
Related Reading: Profit-Taking Panic, Short-Term Bitcoin Holders
Sell Off – What’s Next For BTC? “Our revised forecast now
anticipates three rate cuts in 2024, a slight adjustment from our
previous prediction, primarily due to a modest uptick in the
inflation trajectory,” Goldman Sachs analysts elucidated. They
further speculate, “While the immediate focus is on maintaining
current rate levels, the trajectory for rate cuts will hinge on
inflation dynamics and economic performance indicators.” Goldman
Sachs further predicts that the Fed will still target a first cut
in June. “This combined with a default pace of one cut per quarter
implies that the most natural outcome for the median dot is to
remain unchanged at 3 cuts or 4.625% for 2024,” the banking giant
remarked. Goldman: Inflation has been firmer in recent months, but
we think it is still on track to fall enough by the June FOMC
meeting for a first cut. pic.twitter.com/0I1BPYiU8W — Mike
Zaccardi, CFA, CMT 🍖 (@MikeZaccardi) March 17, 2024 As the crypto
market and broader financial ecosystems await the outcomes of the
FOMC meeting, the prevailing sentiment is one of cautious
anticipation. Market participants are closely monitoring the Fed’s
commentary for indications of future monetary policy directions via
the dot plot. The question for the Bitcoin and crypto market is
whether there will be an unpleasant surprise or whether market
participants were right with their “higher for longer” policy
assumption. At press time, BTC found support at the $62,400 price
level, trading at $63,118. Featured image from Shutterstock, chart
from TradingView.com
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