The highly anticipated FOMC meeting recently took place, and there was much to discuss not just regarding crypto but also the overall market and the record-setting inflation levels which were the highest they have been since 1982.
In summary, US Federal Reserve Chairman Jerome Powell confirmed at the FOMC meeting that the central bank expects to raise interest rates twice more, at the very least. Still, his acknowledgement that the disinflationary process has officially begun has provided traders with some semblance of reassurance that those would be the final two hikes of this cycle and that the Fed shall be on hold midway through the second quarter of 2023.
Correspondingly, his repeated emphasis on various core services has offered a clear inflation metric for traders to monitor in order to determine what the central bank shall do within the next few months. Powell also talked about the ongoing conflict in Ukraine and how that is adversely affecting the economy, but is hopeful that inflation will continue to ease somewhat.
How did the market react?
Following a modest reaction to the monetary policy statement, the market appears to have concluded that the FOMC meeting was more dovish than expected. Still, the crypto market continues its gradual road to recovery, as investors gradually make their return while Bitcoin looks to slowly gain momentum once more.
In any case, the United States Dollar (USD) is losing 50-100 pips against all of its major competitors. Infact, the entire Treasury yield curve is steadily falling, with the closely watched 2-year yield decreasing by over 10 basis points to 4.12%. Elsewhere, gold went up 12 points on the day to just under $1,960, and the broad US indices were up as well, led by a 1.5% gain in the Nasdaq 100.
What comes next for Bitcoin?
The Fed-provided benchmark rate rested between 450 and 475 basis points as of the time of writing, its highest level since 2007. The 25-point increase corresponded with market expectations and was less severe than the 50-point increase in December.
For its part, Bitcoin was trading around $23,000 before the announcement and saw little movement in the aftermath. Nevertheless, there has been a steady increase since last month after rallying alongside numerous tech stocks in response to the positive inflation data that arose at the end of 2022.
Furthermore, with inflation seemingly on the decline, market participants began to suspect that the Fed was planning to either slow or reverse its interest rate hikes, thereby making investment easier and hopefully bolstering the economy.