The two largest cryptoassets bitcoin (BTC) and ethereum (ETH) rose in the market today, as a sense of relief sent nearly all risk assets higher ahead of the US Federal Reserve’s FOMC statement later today.
At 17:34 UTC, BTC was up almost 3% for the past 24 hours to a price of USD 38,268, while ETH was up over 6%, trading at USD 2,622.
At the same time, the technology-heavy Nasdaq stock index had risen 2.5%, and the S&P 500 index gained 1.7% – just over three hours into the trading day on Wall Street.
The Fed’s statement is expected at 14:00 EST (19:00 UTC) today, and it is widely expected that the Fed will confirm that interest rate hikes will start in March this year.
“We see the Fed building towards a March hike, but at the same time creating flexibility,” the European financial services firm Nordea wrote in a note ahead of today’s statement. It added that the statement “should dismiss” speculation about a 0.5% hike, and that it does not expect a faster pace of tapering to be announced.
“This could make for a brief market relief,” the bank wrote.
Commenting on how the market might react to the statement, George Selgin, an economist at the libertarian think-tank the Cato Institute, wrote on Twitter that he does not expect “modest” tapering to have a substantial impact at all.
“Tapering has become the latest market bugbear. Yet, in theory at least, unlike actual rate hikes, modest changes in the size of the Fed’s balance sheet, in either direction, shouldn’t have any substantial consequences,” Selgin said.
Meanwhile, others hinted that the market may not react so calmly to what the Fed has to say, with fund manager Steven Van Metre writing that getting inflation under control is now the most important task for the Fed, which necessarily means that any market reactions would be secondary.
“The President and Congress told [Fed chair Jerome Powell] to get inflation down, and he’s going to do it,” Van Metre said.
Commenting to the Wall Street Journal earlier today, Luca Paolini, Chief Strategist at Pictet Asset Management, said that all eyes are on the Fed today, adding that the tone of the press conference will be as important as the content of the statement.
“It’s more about the tone of the press conference. People may have an expectation that given the market turmoil and the geopolitical tensions, the Fed may tone down its rhetoric,” the strategist said.
Lastly, with crypto markets having already fallen significantly from the top last year, former BitMEX CEO Arthur Hayes wrote in a blog post on Tuesday that bitcoin appears tempting below USD 30,000, regardless of the tone of the Fed’s statement.
For BTC, a notable resistance level can be found around USD 28,500, while USD 1,700 will be an important level for ETH, the outspoken former CEO said.
“I don’t believe in a bottom until these levels are retested. If the level holds, amazing. This prong has been met. If it doesn’t, then I believe a mega liquidation candle will happen in the USD 20,000 to USD 28,500 range for BTC and the USD 1,300 to USD 1,700 range for ether,” Hayes predicted.
– How Global Economy Might Affect Bitcoin, Ethereum, and Crypto in 2022
– Bitcoin in an Interest Rate Rising Environment
– IMF Warns of Dangers of Fed’s Rate Rise, Brazil Says Inflation ‘Won’t Be Temporary in West’
– Two Main Macro Scenarios in Play for Bitcoin & Crypto in 2022 – CryptoCompare
– Bitcoin, Ethereum Could Benefit If Stocks Drop After Fed Tightening – Strategist
– Inflation Is the Biggest Test Yet for Central Bank Independence