Possible Outcomes of FOMC Meeting, How Would Bitcoin And Crypto Market React?

Bitcoin and the broader cryptocurrency market have come under strong selling pressure a day before the FOMC meeting, as sentiment turns risk-OFF. The Bitcoin price is already down over 5% just flirting around the $60,000 level as of now.

FOMC Meeting and Its Possible Outcomes

In a significant shift, market expectations for rate cuts have drastically reduced since the beginning of the year. Initially, January saw discussions of a fantasy scenario involving six rate cuts. However, the current sentiment anticipates only one rate cut by December.

Some of the largest Wall Street banking giants remain divided over when the first-rate cuts by the Fed are coming. The CNN report states JPMorgan and Goldman Sachs are forecasting the initial rate cut to occur in July, with Wells Fargo placing its bet in September.

On the other hand, Bank of America’s projections point towards the first cut not materializing until December. Interestingly, some Fed policymakers have even discussed the potential for a rate hike instead of a cut, adding further complexity to the evolving economic landscape.

Market analysts are expecting that the strong inflation print will force the Fed to hold the interest rates higher for a longer term. However, some believe that this could lead to a situation of stagflation as GDP growth will take a hit. Financial advisor Kurt. S. Altrichter said that the U.S. Fed remains focused on two paths at this point: rates remain steady or cut. He added that if the Fed keeps interest rates unchanged, then in such a scenario:

“The rally continues. Equities should welcome the Fed’s pushback on rate hikes, and while that is not a material bullish catalyst, it should support stocks. Value and cyclical should lead stocks higher and I would expect the $SPX to rise less than 1%. Treasury yields should drop less than 10 basis points. The dollar should be relatively muted or drop slightly. Commodities should see a small bounce”.

Altrichter added that in the case the Fed turns Dovish, the S&P 500 can rally another 1% moving past 5,200. He also expects the 10-year Treasury yield to drop to 5.4%.

LIKELY MARKET REACTION: DOVISH SCENARIO

Expect a solid rally on the $SPX, especially if J-Powell only focuses on hold or cut and pushes back on the recent inflation bounce; September rate cut expectations should rise while risk assets rally and yields drop.

The $SPX would…

— Kurt S. Altrichter, CRPS® (@kurtsaltrichter) April 30, 2024

How Will Bitcoin and Altcoins React?

The crypto market succumbed to downward price pressure, experiencing a notable decline before the FOMC. Altcoins bore the brunt of this downturn, exacerbated by concerns surrounding the Federal Reserve’s anticipated decision to maintain high-interest rates.

As anxiety gripped the market ahead of the Federal Reserve interest rate announcement scheduled for tomorrow, the dollar index surged, reflecting a flight to safety. These factors contributed to the downturn in the crypto market. The market appears to be in a state of uncertainty, with directionality uncertain until the interest rate announcement.

While short-term pressures may persist if interest rates remain high and inflation persists, this may not necessarily bode ill for the crypto market in the medium to long term. Conversely, assets like stocks, bonds, and real estate could falter, while gold, silver, oil, and Bitcoin are anticipated to yield significant returns.

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