Robert Steinadler, 15 days ago

Bitcoin is cautiously bullish: Fed meeting minutes hint smaller rate hikes

The biggest factor this year that determined the Bitcoin price was the crypto drama that unfolded in 2022. With the FOMC meetings and the release of the inflation data, a second factor came into play that wasn’t exactly bullish this year either. Yesterday, the Fed released the FOMC meeting minutes, and a couple of remarks gave hope that a pivot may be closer than we think.

Why is the FOMC meeting so important, and what were the results of the last meeting?

Expectations are the most important factor

The Fed has basically only one tool to counter inflation, and by raising the interest rate, nearly all markets are hurt at some point. This is why not only crypto is suffering, but also stocks and bonds didn’t do too well throughout the year.

Markets are driven by investor expectations, and for the last 11 months, they were all looking for a sign that Fed could initiate a pivot. No such thing was in sight until yesterday’s meeting minutes were released.

The result isn’t turning heads, but the Fed is considering a smaller rate hike, lowering them from 75 bps down to 50 bps. Of course, this means that inflation is still nowhere near the target of 2 %, and rate hikes will continue. The fact that the Fed is showing a willingness to go easy on the market was a relief, and stocks, as well as Bitcoin and crypto, recovered a little bit.

Are we out of the woods yet?

Optimists see bottom signals everywhere, while pessimists are fearful that the crypto drama around Genesis Trading and DCG could produce yet another disaster. The observation that any more bad news could damage the market and the trust of investors further is correct. Still, we don’t know the future and the fact that crypto recovered on the Fed news is a good sign.

It means that the crypto market is not only driven by the downfall of FTX and other companies. Positive internal and external events can still push the market in the right direction. In conclusion, as soon as the worst part of the recent events involving FTX and other companies is settled, there is a chance that crypto could celebrate a comeback, depending on the economic environment.

The fact that many companies and startups are still building their dApps and products is a good sign that crypto is here to stay.

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