As the Federal Open Market Committee (FOMC) mulled its likely path sideways, major cryptocurrencies stood largely in place from the previous day’s levels.
Bitcoin, the largest cryptocurrency by market capitalization, was recently trading above $27,300, up about 1.2% over the past 24 hours. Early Tuesday, BTC jumped above $27,000 for the third time in a month, slipping slightly but then regaining its perch comfortably above the threshold as investors waited for the central bank to announce its next interest rate decision on Wednesday.
The CME Federal Funds Rate tool – a widely watched predictor of Federal Reserve monetary policy – now forecasts a 99% probability that the bank will not raise interest rates amid worries that it has been overly hawkish. Still, Fed watchers largely expect Chair Jerome Powell to talk tough in his post-announcement comments. The bank is committed to taming inflation, which has declined steadily over the past 13 months but remains uncomfortably above the Fed’s 2% goal.
In an email to Unchained, Dave Weisberger, CEO and co-founder of algorithmic crypto trading platform CoinRoutes, wrote that bitcoin is unlikely to move much from its current range between $25,000 and $27,000, even if the Fed strongly hints at a rate increase later this year or unexpectedly raises it on Wednesday.
“Bitcoin has been driven more by patient spot buying, particularly during selloffs, so I’m not sure it would sell off very much if the Fed comes out with particularly tough language, Weisberger said. “If they surprise with a rate hike tomorrow, Bitcoin will likely drop along with other risk assets, but I would be surprised if it fell below the mid-$25,000 range. This has been a strong support level.”
“In short, I think the Bitcoin bottom is in,” he added.
Ether was recently changing hands at $1,640, roughly flat from Monday, same time. The second largest crypto in market value has largely mirrored bitcoin over the past week, rising steadily after hitting a lull below $1,550 on September 11. Other major altcoins were up slightly, although TON, the native crypto of layer 3 blockchain infrastructure provider Toncoin, was up more than 6.6%. Toncoin has spiked more than 40% since last week when the messaging app Telegram announced that it would integrate the TON network into its app. MATIC, the token of smart contracts platform Polygon, recently rose 3.1%
Equity markets, which regained some ground last week, dipped slightly with the tech-heavy Nasdaq and S&P 500 both sinking 2% to hit their lowest levels in September. But Brent crude oil, a measure of energy markets, and Treasury yields rose.
Weisberger wrote that Powell is likely weighing the potential inflationary impact of the ongoing U.S. autoworkers (UAW) strike and that aggressive comments could at least initially shake risk-on asset markets.
“The market will be parsing Chairman Powell’s language rather closely tomorrow,” he wrote. “Even though Powell probably won’t mention the topic of the UAW and other union demands, it’s clearly on his mind, particularly as it could signal the start of a wage-push inflation cycle. Thus, it would be unsurprising if Powell comes out rather aggressive in tone, which could well lead to a market dip.
But he also noted that household and federal debts had reached all-time highs and that long-term rates could propel service on U.S. government debt to completely dominate spending and become unsustainable.”
“The Fed probably will have to consider some form of yield curve control, which, in practice, means quantitative easing, even if they hike short-term rates,” he added. “In such a scenario, I think Bitcoin would continue to perform relatively well.”