Low Volatility in Bitcoin Expected After Fed Rate Decision
According to some crypto traders, the volatility in bitcoin remains low, reflecting the calmness in the US stock and bond markets. This trend is expected to continue after the Federal Reserve (Fed) announces its rate decision on Wednesday. The central bank is anticipated to maintain the benchmark borrowing cost between 5.25% to 5.5% and keep its data-dependent stance unchanged. The Fed has been clear about monitoring economic releases before making any changes to interest rates. Traders predict that bitcoin will only move by around 2.8% following the rate decision, suggesting that Chairman Powell’s comments are not likely to have a significant impact on the market.
Fed’s Data-Dependent Stance
The Fed has consistently emphasized that future interest rate decisions will be based on inflation and employment trends. Despite speculation about the end of the rate hike cycle, the central bank is expected to maintain a cautious approach and avoid signaling any major changes in monetary policy. However, if inflation rebounds and the Fed signals an end to the tightening cycle, it could lead to renewed liquidity easing and complicate matters for the central bank. As a result, the probability of a hawkish or dovish surprise from the Fed is considered low.
Bitcoin Options Indicate Non-Event Rate Decisions
Bitcoin options expiring this Friday, which coincide with the Fed and Bank of Japan (BOJ) meetings, suggest that these rate decisions may not have a significant impact on the market. Options traders use these contracts to assess potential post-event volatility in an underlying asset. Based on current market pricing, traders expect bitcoin to move by only 2.8% after Chairman Powell’s comments. Historically, bitcoin has experienced modest rallies of around +1% shortly after FOMC meetings and +3% one week later in 2023.
Hot Take: Low Volatility Expected in Bitcoin Following Fed Rate Decision
The upcoming Federal Reserve rate decision is unlikely to cause significant volatility in the bitcoin market, according to crypto traders. The low volatility regime is expected to persist as the central bank maintains its data-dependent stance and refrains from signaling any major changes in interest rates. Traders anticipate that bitcoin will only move by approximately 2.8% following the rate decision, indicating that Chairman Powell’s comments are not anticipated to have a substantial impact. With bitcoin options suggesting non-event rate decisions, it appears that market participants are not expecting any surprises from the Fed or Bank of Japan meetings.
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