The Federal Open Markets Committee (FOMC) is set to announce its policy interest rate on Wednesday, and analysts predict that the rate will remain unchanged. This comes as no surprise, as the CME FedWatch tool indicates a 99% likelihood of a flat rate decision. While this may seem uneventful to some, it could have a positive effect on Bitcoin.
Historically, the price of Bitcoin has shown correlation with risk equities and central bank policies. When credit conditions are more favorable in the economy, Bitcoin tends to experience a price increase, and vice versa. With analysts predicting a flat rate decision, it suggests a favorable credit environment, which could potentially lead to a bullish trend for Bitcoin.
Wharton Finance Professor Jeremy Siegel argues that the Fed should not raise rates at this point. He believes that any continued rate hikes could have detrimental effects on unemployment rates and core inflation. Siegel’s position is a departure from his stance last year when he advocated for rate hikes to “defend the dollar.”
In contrast, given the current strength of the economy based on real economic data, Siegel anticipates a strong stock market in the coming months. He suggests that the equity market could remain firm until the end of the year.
The impact of Fed rate decisions on Bitcoin’s price has been evident in the past. When the Federal Reserve lowered its benchmark interest rate to 0.25% in March 2020, Bitcoin experienced a significant surge in value. Crypto trader Sem Agterberg, also known as Crypto Rover, believes that a 0% rate increase announcement tomorrow could have a bullish effect on Bitcoin.
Overall, the FOMC’s policy interest rate decision will be closely watched by investors, particularly those in the cryptocurrency market. A flat rate announcement is expected, and this could potentially lead to a positive trend for Bitcoin. As always, it is essential to monitor market developments and stay informed.
– CME FedWatch tool
– Interview with Wharton Finance Professor Jeremy Siegel on CNBC
– Twitter account of Crypto Rover (@CryptoRover)