The Bitcoin market is currently undergoing a correction phase, indicating a potential adjustment in the cryptocurrency’s value. This correction has been gaining momentum, drawing the attention of investors and analysts who are closely observing market dynamics and potential contributing factors.
Adding to the complexity of the situation is the looming prospect of the Federal Reserve’s interest rate decisions. The Federal Reserve’s policies and announcements regarding interest rates can have significant implications for not only the cryptocurrency market but also the broader financial landscape. As such, investors are closely monitoring the Federal Reserve’s actions and statements for insights into how they might impact cryptocurrency prices and overall market sentiment.
Overall, the convergence of the correction phase in the Bitcoin market and the uncertainty surrounding the Federal Reserve’s interest rate decisions creates a dynamic and potentially volatile environment that requires careful observation and analysis by market participants.
Bitcoin price is in Fed trouble
During the weekend, Bitcoin has experienced a downturn as negative sentiment prevails. Currently, Bitcoin (BTC) is priced at $67,038.34, reflecting a decrease of 1.5% since yesterday and 0.4% from the previous hour. Compared to a week ago, BTC’s value has declined by 4.1%. The Fear and Greed Index for Bitcoin is at 79, indicating extreme greed among investors.
The total crypto market cap stands at $2.64 trillion, showing a year-over-year increase of 117.81%, but a 2.99% decrease over the past twenty-four hours. BTC currently holds a market cap of $1.31 trillion, accounting for 49.39% of the total market share. Stablecoins represent $149 billion, making up 5.63% of the total crypto market cap.
Looking ahead, at the upcoming March meeting of the Federal Reserve of the United States, interest rates are expected to remain unchanged. However, forecasts suggest potential rate decreases in 2024, prompting the market to seek clues regarding the timing of these adjustments.
The Federal Open Market Committee will meet from March 19 to 20, with the target Federal Funds rate announcement scheduled for March 20 at 2 p.m. ET. The current target range stands at 5.25% to 5.5% and is unlikely to change. Federal Reserve Chair Jerome Powell will host a press conference at 2:30 p.m. ET, providing additional insights and addressing questions. Moreover, officials will update their Summary of Economic Projections, including estimates on future rate trajectories, often referred to as the dot plot. The Fed is expected to release the meeting minutes on April 10.
Market participants, particularly those in fixed-income markets, will closely monitor these developments. According to the CME FedWatch Tool, interest rate decreases are anticipated to commence in June or July, with expectations of three or four rate cuts in 2024.
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Bitcoin market correction is just getting started – Fed rate outlook in sight© Provided by Cryptopolitan
Michelle Bowman, a member of the Federal Reserve Board of Governors, recently expressed more hawkish views on monetary policy. In a speech on March 7, Bowman stated that if incoming data continues to indicate a sustained movement of inflation towards the Fed’s 2 percent target, it may become appropriate to gradually lower the policy rate to prevent monetary policy from becoming overly restrictive. However, Bowman emphasized that, in her view, the current situation does not warrant such action. She cautioned against reducing the policy rate prematurely, as it could necessitate further rate increases in the future to return inflation to the desired 2 percent level over the longer term.
Inflation trends data and effect on Bitcoin
Inflation has receded from its recent highs but remains below the Federal Reserve’s target of 2% annually. The latest February Consumer Price Index (CPI) report indicated an annual inflation rate of 3.2%. While the Fed often favors the Personal Consumption Expenditures Price Index (PCE), which reported annual inflation of 2.4% in January.
The upcoming revision of the PCE index for February, set to be released on March 29 following the Fed’s meeting on the 20th, raises concerns. Despite inflation having slowed notably since its peak, current data suggests a potential slight acceleration by early 2024. For instance, CPI inflation rose by 0.3% monthly in January and 0.4% in February, both exceeding levels seen in the previous 12 months. To achieve its 2% target, the Fed would ideally need to observe monthly inflation rates of approximately 0.1% to 0.2%. Nevertheless, inflation has significantly declined from its 2022 peak.
The Fed is closely monitoring these statistics and seeks confidence that inflation will eventually return to its 2% target before considering rate decreases. Current apprehensions about rising inflation may be temporary, as indicated by the Atlanta Fed’s CPI forecast for March, suggesting inflation closer to 0.2%.
On another note, net inflows into the Bitcoin-spot ETF market decreased on Friday, prompting Bitcoin’s decline. On Saturday, March 16, Bitcoin fell by 5.99%, closing at $65,437. Buyer demand for Bitcoin was influenced by BTC-spot ETF market flow data from Friday, which showed $338.2 million in net inflows (excluding Grayscale Bitcoin Trust outflows). This marked a decrease from $389.8 million on Thursday and $960.2 million on Wednesday.