HomeCryptoWhat will happen to the crypto market after the FOMC meeting?

What will happen to the crypto market after the FOMC meeting?

The latest meeting of the Federal Open Market Committee (FOMC) is being held these days, specifically on May 2 and 3, 2023, and because of this meeting the crypto world could experience rises or falls.

In general, as Gracy Chen, managing director of crypto exchange Bitget, explains in an analysis, the impact of FOMC on the crypto market is indirect, and there are several factors that could affect the sector.

First of all, what Chen mentions in her analysis is interest rates.

In fact, one of the FOMC’s most important tools is the federal funds rate, or the overnight lending rate between banks. 

These changes can affect banks’ borrowing costs, which in turn can affect lending and spending decisions in the broader economy, and thus the value of the USD in global currency markets and that of crypto.

As a result, this can affect traders’ sentiment and risk appetite.

Gracy Chen, Managing Director of Bitget, one of the leading crypto trading platforms, explains:

“If the FOMC raises interest rates or implies a more hawkish stance, it may lead to increased demand for the USD, causing it to appreciate against other currencies. Since many cryptocurrencies are traded against the USD, a stronger USD may lead to reduced demand for cryptocurrencies, putting downward pressure on their prices”.

FOMC: Volatility in the Crypto Market and Beyond

The FOMC meeting may also lead to increased market volatility, as traders are sure to react based on the committee’s findings and statements. 

“The high volatility of traditional financial markets may spill over to the crypto market, as cryptocurrencies are often seen as more speculative and high-risk assets.”

Chen continues his analysis.

In any case, one must also keep in mind that the results of the FOMC meeting are symbolic. In fact, according to the CME’s Fedwatch data, there is a 31 percent chance that rates will not be raised at the meeting and a 69 percent chance that rates will be raised by 25 basis points. 

If the Federal Reserve does not announce a rate hike, it will mean that the hiking cycle has temporarily ended and the Fed’s monetary policy has turned.

Under these market conditions, the U.S. dollar may come under downward pressure and market funds may begin to focus on industries, sectors and regions with high growth potential, including U.S. tech stocks, the cryptocurrency market and emerging markets.

Also, with the collapse of traditional banks, such as First Republic Bank and many others recently, there is a growing demand for “safe havens” in which to invest.

Bitget’s CEO concludes:

“We have observed that after the collapse of SVB and Credit Suisse, the price of Bitcoin has followed the trend of gold, which reminds us of Satoshi’s original intention to create BTC, which is to create a trustless financial payment system, retrieve everyone’s financial power from financial conglomerates, and create a decentralized financial system that benefits every participant”.

RELATED ARTICLES

MOST POPULARS

GoldBrick