Bitcoin and Crypto Market Experience Downtrend Ahead of FOMC Meeting
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.
Anticipation Surrounding Fed’s Stance on Interest Rates
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.
What to Expect from the FOMC Meeting?
- The consensus suggests interest rates will hold steady with a 99% probability according to the CME FedWatch tool.
- The spotlight turns to the Fed’s dot plot, a graphical representation of individual members’ expectations for future interest rates.
- The dot plot could provide crucial insights into the monetary policy outlook for the coming months and years.
Macro Factors Take Precedence
Ted, a macro analyst, emphasizes the nuanced relationship between macroeconomic trends and the crypto market. He states that spot Bitcoin ETF flows have taken a backseat while macro factors came to the foreground. 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.
The Market’s Hawkish Stance
Ted speculates that despite remarks from Fed Chair Powell, the market has already adopted a hawkish stance in anticipation of a “higher for longer” interest rate scenario.
Insights from Crypto Analysts
Michaël van de Poppe, a noted figure in the crypto analysis domain, provides his insights on the recent downward price movement of Bitcoin. He cites a mix of factors, including the anticipation of the FOMC meeting and significant capital outflows from Grayscale’s Bitcoin Trust. Van de Poppe advises that it’s typically in these pre-FOMC periods, perceived as risk-off intervals, that savvy investors find opportunities to “buy the dip.”
In reflection of market sentiment adjustments, analyst @10delta points 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, indicating that investors are adjusting their expectations based on the Fed’s potential pivot signaled in the previous dot plot.
Accordingly, he argues that the FOMC & dot plot will be a “buy the news” event as market expectations are being properly adjusted. The macro worries should dissipate, and crypto idiosyncratic bullish factors, such as ETF inflows and the BTC halving, will take hold. He believes there’s a good risk/reward ratio for “buying the dip” heading into the March 20 event.
Goldman Sachs Predicts (Only) 3 Rate Cuts This Year
Goldman Sachs Research provides 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.
Their revised forecast now anticipates three rate cuts in 2024 due to a modest uptick in the inflation trajectory. While maintaining current rate levels is immediate focus, rate cuts will depend on inflation dynamics and economic performance indicators.
Goldman Sachs 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.
Hot Take: Impact of FOMC Meeting on Bitcoin and Crypto Market
The Bitcoin and crypto market is currently experiencing a severe downtrend ahead of the FOMC meeting. The anticipation surrounding the Fed’s stance on interest rates has heightened, and the market is bracing for potential volatility.
Macro factors have taken precedence in the market, with investors adjusting their expectations based on recent economic indicators. Savvy investors see opportunities to “buy the dip” during pre-FOMC periods, which are perceived as risk-off intervals.
Goldman Sachs predicts only three rate cuts this year and emphasizes the balance between controlling inflation and supporting economic growth. The outcome of the FOMC meeting will have an impact on the Bitcoin and crypto market, with potential opportunities for investors to capitalize on market adjustments.
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