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Ahead of the Federal Open Market Committee (FOMC) meeting scheduled for Wednesday, March 20th, Bitcoin and the cryptocurrency market are experiencing a significant downward trend. Bitcoin's price has plummeted by approximately -10% over the past two days, while Ethereum (ETH) has dropped by -12% during the same period.
With recent economic indicators, including unexpected spikes in the U.S. Consumer Price Index (CPI) and Producer Price Index (PPI), strengthening expectations around the Fed's interest rate stance, volatility has been triggered across the entire market, including digital assets.
According to data from the Chicago Mercantile Exchange's FedWatch tool, the consensus indicates a 99% likelihood of rates remaining unchanged. Nevertheless, attention is turning to the Fed's dot plot, which is a graphical representation by individual members of their future rate expectations, providing crucial insights into the monetary policy outlook for the coming months and years.
Bitcoin and Cryptocurrency Reaction
Macro analyst Ted expressed his views on X, emphasizing the delicate relationship between current macroeconomic trends and the cryptocurrency market. Ted explained that the flow of spot Bitcoin ETFs has receded to the background, with macro factors taking center stage.
He stated on X, "If BTC is seen as digital gold, it is expected to mirror the market trends of gold, albeit with higher volatility. In the current climate, as the market prepares for the upcoming Fed meeting, driven by the latest developments in the PPI and CPI data, macroeconomic factors temporarily take precedence."
He further speculated, "Although (Fed Chair) Powell ultimately made a statement, the market has adopted a hawkish stance, expecting rates to 'remain high for a long time.'"
Prominent figure in the cryptocurrency analysis space, Michaël van de Poppe, provided his insights into the recent price decline of Bitcoin through X, citing various factors including expectations around the Federal Open Market Committee meeting and significant outflows from Grayscale's Bitcoin Trust. Van de Poppe suggested, "It's typically during these periods just ahead of the Federal Open Market Committee that offer smart investors a 'buy-the-dip' opportunity."
Analyst @10delta on X pointed out investors' strategic positioning regarding Fed rate decisions, reflecting adjustments in market sentiment. He noted, "The current market pricing will revert to the rate levels of November 23, indicating clearly that investors are adjusting their expectations based on potential shifts by the Fed as indicated in previous dot plots."
Therefore, he believed that with the appropriate adjustment of market expectations, the Federal Open Market Committee and dot plots would be a "buy-the-news" event. The analyst added, "Macro concerns [...] should dissipate, and bullish factors unique to cryptocurrencies, such as ETF inflows [...] and the Bitcoin halving. Overall, I think there's a good 'buy-the-dip' opportunity ahead of the event on March 20th."
Goldman Sachs Forecasts Three Rate Cuts This Year
Goldman Sachs Research recently provided a detailed analysis in its March Federal Open Market Committee preview. The report highlighted the delicate balance the Fed is attempting to achieve between controlling inflation and supporting economic growth.
Goldman analysts explained, "Our revised forecasts now expect three rate cuts in 2024, a slight adjustment from previous forecasts, primarily due to a slightly rising inflation trajectory." They further speculated, "While the current focus is on maintaining the current rate levels, the trajectory of rate cuts will depend on inflation dynamics and economic performance indicators."
Goldman further predicted that the Fed would still make its first rate cut in June. The banking giant stated, "This, combined with the pace of a rate cut once per quarter, suggests that the most natural outcome is to remain at three rate cuts or 4.625% unchanged in 2024."
Goldman: Inflation has been strengthening in recent months, but we believe that by the time of the June Federal Open Market Committee meeting, inflation will have declined to a level sufficient for the first cut. pic.twitter.com/0I1BPYiU8W— Mike Zaccardi, CFA, CMT |
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Post time 28-3-2024 13:41:52
