Crypto waiting for direction from upcoming FOMC meeting?

With another rate hike universally expected to be announced on Wednesday, will this be the cue for bitcoin and crypto to take another leg down?

A quarter percent rate rise

The next FOMC meeting opens today, when the Federal Reserve board of governors and reserve bank presidents get together to review monetary policy and to decide whether yet another interest rate hike is necessary.

The market is expecting a nailed-on 0.25 basis point rate hike given that the CME Fedwatch tool is showing a 98.9% probability of such a move. Most market analysts, including the Fed itself are predicting one more rise this year, and then the hiking could well be finished for this cycle.

Jobs market too strong

Even though inflation looks to be coming down strongly, and is even approaching the Fed’s target of 2%, Chairman Jerome Powell points to the robust labour market as a sign that the battle is not yet won. It would appear that many more businesses need to go to the wall, and Americans need to lose their jobs at a far faster rate in order to stop them spending and supposedly adding upwards pressure to inflation.

The Fed’s reactive policy

Powell has his work cut out once again. Keeping a straight face as he announces the Fed’s policy for the next few months cannot be easy. History has shown that the Fed is always late with its tightening or easing, and then it always carries on for far too long. 

However, such is the nature of our debt-based monetary system and that we give an organisation like the Federal Reserve the power to try and manipulate markets in one direction or the other, rather than leaving it to the markets to balance things out.

So, the Fed will press on with another rate hike, and will look to implement one more before the end of the year. In the Fed’s view this will be enough to act as a drag on the jobs market and will help to bring inflation down to its target.

Crypto waits for liquidity or a spark

It appears that crypto might have to wait a bit longer before the lifeblood of liquidity comes back into the market and provides the stimulus for the rest of the current bull market. 

That Bitcoin will be one of the main beneficiaries is very likely. A Bitcoin Spot ETF approval can of course provide the spark that sends crypto on its next leg higher. Be that as it may, in the short term, as rates go higher, the crypto market could have its work cut out to move out of the current doldrums it has been in for the last month.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.