Fed Chairman Powell will give his customary speech at the end of the FOMC on Wednesday. He is expected to announce that interest rates will stay the same. What are the likely repercussions for the crypto market?
Rate cut in March?
At the end of the second day of the January FOMC meeting, Federal Reserve Chairman Jerome Powell will come out and face the world’s cameras and give a speech, every little nuance of which politicians and economists will pore over in great detail.
To be absolutely honest, Powell will probably not have anything startling to say. He will likely say something along the lines of “the US economy remains strong and resilient”, and that “the Federal Reserve will lower rates when and if needed.”
However, the market will be listening very keenly to the possible chances of a first rate cut in March. With this in mind, Powell will probably be extremely careful not to give anything away on this possibility, being fully cognizant that even the merest hint from him of a potential rate cut in March is likely to send markets into a frenzy.
Given that the Fear and Greed Index for the US economy is currently in Extreme Greed mode, the market could get even more overheated.
So what about the crypto market?
Crypto starts Wednesday in the red
Wednesday is seeing a bit of bleed-out for most of the altcoins, and bitcoin is back below $43,000. Having said this, it is fairly normal for the crypto market to see some heightened volatility on the second FOMC meeting day, especially in the hours before Powell’s speech, and particularly during and after it.
Source: Coingecko/Trading View
Bitcoin is coming back to its trend line again, the daily and 12-hour Stochastic RSIs are in overbought territory, and therefore $BTC is perhaps likely to at least touch the trend line.
A steeper correction?
If the price should fall through, then there is still support at the $39,000 level, but if $BTC gets below this with confirmation, the 21% correction in play since 11 January could get a lot steeper.
However, whatever might happen in the short term, both $BTC and the more fundamentally sound altcoins, are still likely to recontinue this crypto bull market, even if a more serious correction does take place first.
Traders should expect a lot of volatility on Wednesday for the reason already mentioned. It would therefore be sensible to take proper risk management measures like setting stop losses. Trade safely.
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.
