Cryptocurrency market participants are awaiting a meeting of the US Federal Reserve System (FRS) on January 30–31, at the end of which they will announce a decision on interest rate changes, as well as macro data on inflation and the labor market. In addition, for many players, the speech of the head of the department, Jerome Powell, is important, the consequences of which may also have an impact on global markets, including the prices of crypto assets.
Interviewed “RBC-Crypto” analysts told how the price might behave after the Fed meeting. The Fed's decision will be announced on January 31.
“Volatility will be high”
Cryptocurrency market analyst Viktor Pershikov
“Investors are looking forward to the upcoming Fed meeting, as there is a possibility that it will provide specific data on the prospects for monetary policy easing in the United States. Markets are already factoring this into current price changes: the US stock market is growing on these expectations, and cryptocurrency is stable precisely against the backdrop of expectations of fresh liquidity.
If pro-inflationary factors take over (and now there is noticeable growth in the US money supply, as well as geopolitical risks associated with freight and logistics) and the Fed chooses not to give markets signals about easing, this factor will become disappointing for risk assets, as a result of which one can expect more a deeper correction in cryptocurrency than last week.
I believe that this meeting will not be decisive and the situation will depend, among other things, on macro data on inflation, employment and the labor market as a whole. Although volatility during the meeting will be high, it is unlikely to lead to significant changes in the prices of crypto assets.”
“Not for the crypto market, but for the dollar”
BitRiver financial analyst Vladislav Antonov
“According to CME Group, the probability of maintaining the 5.25-5.50% rate range is 97.6%. When 30-day Fed Funds futures rise above 90%, the Fed is doing what the market expects. The preservation of rates is already included in the prices, so you should not expect a reaction to the decision.
The meeting on May 1 is of greatest interest to investors. It is expected that rates will decrease with a probability of 89.3%. There is still conflicting information for March. Much will depend on incoming statistics.
What is important now is not the decision itself, but what US Federal Reserve Chairman Jerome Powell will say at the press conference after the meeting. Investors will carefully analyze his speech and any signals from the regulator regarding a possible easing of monetary policy in the future.
The US Federal Reserve meeting has an impact not on the crypto market, but on the dollar. And the dynamics of the dollar are already affecting other markets, as investors begin to rebalance their portfolios.”
“We cross out active growth based on the Fed’s decision”
Founder of TerraCrypto Nikita Vassev
“December inflation data in the US turned out to be worse than expected. Therefore, the most likely scenario is that the Fed will leave the key interest rate at the same level. In this case, the crypto market will not receive the necessary support.
A rate cut, which looks implausible given December inflation data, could support investor interest in high-risk assets such as cryptocurrency. Since it’s not worth betting on this scenario, we cross out the possibility of Bitcoin and the entire crypto market going into active growth based on the Fed’s decision.
An increase in the key interest rate is also unlikely. Its increase as part of the Fed's fight against rampant inflation puts serious pressure on the financial market. Many companies may not survive another blow. Therefore, this scenario should also be considered last.
It is worth paying attention to Powell's forecasts. Market participants are waiting for hints about the Fed moving towards lowering inflation. Such signals can trigger an influx of liquidity into the crypto market and further heat it up on the threshold of halving.
On the eve of the publication of the Federal Reserve's decision on the rate, Bitcoin is emerging from oversold conditions amid the completion of the outflow of assets from the Grayscale Bitcoin Trust (GBTC). The fear and greed index is also leaving the red zone, and the flows of stablecoins to crypto exchanges are growing, which hints at the renewed growth of buyers in cryptocurrency and waiting for a convenient position for purchases. General sentiment suggests that even in the absence of a positive Fed decision on the rate, Bitcoin has growth potential.
Another point worth paying attention to is the effect of the upcoming presidential elections in the United States. There are opinions according to which the new head, in order to patch up the holes in the economy, may turn on the “printing press”. The injection of dollars into the market as part of the quantitative easing policy may occur in the last quarter of the year.
Previous attempts by the United States to patch up problems in the economy with money resulted in a significant influx of money into the crypto market. If we add to such actions the likely move by the Federal Reserve to the long-awaited reduction in the key rate and the halving of the influx of new bitcoins into the market after the halving, we get the prospect for significant growth in the crypto industry.”
“Statements that serve as signals”
Co-founder of the ENCRY Foundation Roman Nekrasov
“At the US Federal Reserve meeting on January 30-31, no change in the key rate is expected. But at the end of each meeting, the Fed makes statements that serve as signals to market participants regarding the regulator’s further actions. Investors are hoping to hear hints that already at the March meeting the Fed will decide to ease monetary policy and move on to lowering the key rate.
Representatives of the regulator announced last year that the US Federal Reserve plans to lower the key rate by 0.75 percentage points in 2024. But investors are not confident that the monetary policy easing cycle will begin in March.
If the market receives signals that the Fed is ready to move to lowering the key rate as early as March, this could potentially push up consumer price growth, despite the fact that inflation in the US has not reached the target 2% per annum. And this may push market participants to buy gold as a traditional defensive asset during periods of increased inflation. Bitcoin can similarly be considered as one of the alternative defensive assets in such a case.
If the market receives signals that the Fed is not ready to move to lowering the key rate in March, this could put pressure on the cryptocurrency market and restrain the growth of Bitcoin, preventing it from approaching $50 thousand. Before the March meeting, we can expect increased volatility in the crypto market.”
Source: Cryptocurrency
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