What to expect from this meeting?
Any change in monetary policy initiated by the Fed can significantly alter the dynamics of stock markets and impact asset prices. A reduction in interest rates can, for example, encourage investors to move away from products such as bonds and towards more cryptocurrencies.
Seven weeks after the US Federal Reserve raised interest rates for the first time since 2018, the FOMC is set to hold its third meeting of the year amid the fight against inflation.
According to statements reported by Jerome Powell, Chairman of the Fed, on the occasion of a round table organized by the International Monetary Fund (IMF) last April, this meeting is expected to see quantitative tightening (reduction in the quantity of cash in circulation) via an increase in interest rates on FED funds of around 0.5%.
The analysis of the American economic growth recorded in the second quarter could influence the decisions taken , if a recession is observed, as was the case last March, when a contraction of 1.4% was observed.
What impact for cryptocurrencies?
Although this two-day meeting promises little surprise following Jerome Powell's declaration of intent, crypto investors are on the guard and the uncertainty has already disturbed the markets .
Bitcoin , which has suffered from a bearish trend over the past week, has been struggling since last February to hold around the $40,000 pivot level . Nevertheless, the price of BTC suffered from a wave of profit taking ahead of this decisive meeting. Weakened in this way, the risk of a price break is increased and the long-awaited upward shift could be impacted depending on the reaction of the markets at the end of this meeting.
If the 0.5% rise in interest rates is confirmed, we could see a pullback in the cryptocurrency market , with some analysts even predicting a fall in BTC around $30,000.
Remember that the FED's announcement to increase its interest rates last March was not harmful for the cryptocurrency market, which was already going through a bearish phase. In September 2017, however, the announcement of quantitative tightening measures caused bitcoin to briefly plunge before a rally followed.
In any case, analysts are preparing to see great volatility in the cryptocurrency market in the next 72 hours . The risk that the outcome of the FOMC meeting will catalyze Bitcoin's hitherto uncertain bearish trend is real. It will therefore be necessary, in the coming hours, to be very attentive to variations in volume which will give the pulse of sentiment and investor confidence.
Also, we remind you that if you decide to buy cryptos, you must proceed on a reliable platform. As such, we recommend eToro .