On Wednesday, February 1, we will receive another interest rate decision from the Federal Open Market Committee (FOMC). This is the interest rate meeting of the US central bank, which we also call the Federal Reserve. The expectation for Wednesday is that we will have to make do with an interest rate increase of 0.25 percent.
Fantastic start to 2023
The year 2023 is off to a great start for Bitcoin, with it up about 40 percent since January 1. For the first time since the summer of 2022, the price has risen above $ 23,000 and so far Bitcoin has managed to keep it fairly stable there. “Bitcoin should consolidate ahead of the FOMC decision, with downside risk if the Federal Reserve continues to be hawkish,” Oando’s Edward Moya said in a Friday note to his clients.
By consolidate, we mean that the rate remains roughly in the same regions, and hawkish means that the Federal Reserve is strict. The latter would mean that they opt for more interest rate hikes or that they want to keep interest rates at this reasonably high level for a long time to come. Either of those things would be a bad thing for Bitcoin.
Small revival
Shares rebounded after it was announced on Friday that the Personal Consumption Expenditures (PCE), the Federal Reserve’s favorite inflation gauge, showed a significant slowdown in inflation. That’s a good sign, because ultimately that’s what the Federal Reserve wants to achieve with rate hikes. As long as inflation remains high, interest rates will not fall. In that respect, it is really necessary that inflation continues to fall.
In any case, the crypto market is catching up quite a bit compared to traditional financial assets. While Bitcoin gained almost 40 percent and Ethereum is up around 30 percent, the S&P 500 and the Nasdaq 100 have to make do with only 6 and 10 percent. On that note, the crypto industry seems to be shrugging off the misery of FTX’s collapse.