The cryptocurrency market could experience a near-term downside correction
An analyst suggests that the cryptocurrency market may undergo a near-term downside correction due to the delay in pricing in the possibility of a rate cut by the U.S. Federal Reserve. Bitfinex Head of Derivatives, Jag Kooner, explains that the market is currently pricing in a more dovish stance from the Fed than what has been implied by Federal Reserve Chair Powell’s statements. This lag in pricing could result in a decline for bitcoin and other cryptocurrencies if market expectations for a rate cut continue to be high and the next FOMC meeting results in a pause.
Fed rules out rate cut in March
In an interview on CBS’ 60 Minutes, Federal Reserve Chair Jerome Powell stated that a rate cut in March is unlikely to happen. Powell emphasized that the committee wants to be more confident that inflation is moving down to 2% before considering a rate cut. This announcement has contributed to a risk-off sentiment in the market, according to Kooner.
Risk-off sentiment pervading the market
BIT Mining Chief Economist Youwei Yang points out that there are other uncertainties in the current market conditions contributing to this risk-off sentiment, including the delay in rate cuts and concerns about AI stocks showing patterns similar to the dotcom bubble. Darius Tabai, Co-Founder of Vertex Protocol, adds that there is still no clarity on when rate cuts will come into effect, and it doesn’t make sense for large price movements given current inflation and rates.
Hot Take: Potential near-term downside correction for crypto market
The delay in pricing in a potential rate cut by the Federal Reserve could lead to a near-term downside correction for the cryptocurrency market. Analysts suggest that if market expectations for a rate cut remain high and the next FOMC meeting results in a pause, bitcoin and other cryptocurrencies may experience a decline. This delay, combined with other uncertainties in the market, has contributed to a risk-off sentiment among investors. It remains unclear when rate cuts will come into effect, and market movements are expected to be slow until there is more clarity on inflation and rates.
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