Bitcoin and cryptocurrency prices have seen wild swings this month as traders try to gauge the mood of the Federal Reserve and the ethereum co-founder revealed his surprising “surge” expectations. “.
Bitcoin’s price — after crashing in the first six months of the year as the Fed began raising interest rates — bottomed out in July, rising about 10% since the start of the month. Ethereum, meanwhile, rose nearly 50% due to the hype surrounding the planned upgrade, which helped other top 10 cryptocurrencies.
Now, after leaks revealed a “big red flag” for bitcoin and cryptocurrency exchange Coinbase, the market is bracing for the Fed to go “bigger and longer” in its fight against inflation. .
Federal Reserve Chair Jerome Powell teeters on the tightrope between runaway inflation and a… [+] recession, causing stock markets to rise and the price of bitcoin, ethereum, BNB, XRP, solana, cardano and dogecoin.
The Federal Reserve’s Federal Open Market Committee (FOMC) is meeting on Tuesday and Wednesday this week and is expected to raise interest rates by another 75 basis points, just after the June rate hike.
At the start of the month, following the release of a consumer price index (CPI) of 9.1% in June, traders expected the Fed to raise interest rates by one percentage point.
“Financial markets had begun pricing in a one percentage point rate hike during this meeting, but Fed officials appear to have discounted that prospect,” Russ Mold, chief investment officer at Fed brokerage AJ Bell, wrote in an emailed comment.
According to data from CME Fedwatch, the markets estimate a 70% chance of a 0.75% to 2.50% gain and a 30% chance of a full one-point gain. By the end of 2022, the market estimates a 90% chance that the fed funds rate will reach at least 3.50% as the US central bank aims to bring inflation down to 9.1%, the highest level in 40 years. year.
“But all this depends on, and even assumes, inflation will peak very soon,” Greg McBride, chief financial analyst at Bankrate, told MarketWatch. “If not, all bets are off.”
A producer price index (PPI) of 11.3% this month, close to the record high of 11.6% in March, “suggests more pain is ahead,” Mold said.
The Federal Reserve is also expected to accelerate its quantitative tightening plan, which has already plunged the Fed’s total assets by $66 billion from its all-time high of $9 trillion to $95 billion a year, months from September.
“The Fed’s total assets of $8.9 trillion still means the central bank’s balance sheet is 8% larger than it was a year ago, 114% larger than before the February 2020 pandemic and almost nine times larger than before the pandemic. major financial crisis of 2007-2009,” Schimmel added.
Bitcoin’s price climbed back above $20,000 this month after crashing below the… [+] closely watched and have seen the price of ethereum, BNB, XRP, solana, cardano and dogecoin fluctuate.
Some market watchers and investors fear that US inflation is “deeper ingrained” and that the Fed will have to react “bigger and longer” to push it back.
“My own view is that the Fed fund rate could exceed 4%,” Joseph Zidle, chief investment strategist at Blackstone’s private wealth solutions group, told Bloomberg. “I think they can go beyond 4.5%, maybe even closer to 5%.”
However, after a painful few months for the stock market, bitcoin and cryptocurrency prices, some analysts are hoping that softer language from the Fed could provide welcome relief this week.
“If they do a 75 basis point increase, as we expect, but soften the language on future hikes, that would give markets a huge boost next week,” Luke Barrons told Tilley, chief economist at Wilmington Trust.
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