The Federal Open Market Committee (FOMC) is meeting today at 2 p.m. ET, a highly anticipated gathering. Traditional finance and the cryptocurrency markets, which are more susceptible to macroeconomic cues, are at risk. Notable financial advisor Kurt S. Altrichter has thoroughly analyzed potential outcomes and their implications for X to offer a roadmap of expectations for market participants.
Altrichter notes that the markets have demonstrated resiliency despite the reduction in rate cut forecasts, which went from six at the beginning of the year to only one at the end. This is mainly because investors believe that the following action from the Federal Reserve will be a reduction rather than a rise. This has resulted in a dangerous equilibrium for the cryptocurrency market. Initially, the market seemed unaffected by the implications, but investors now appear to monitor the macro situation attentively again.
FOMC Prediction: What Will Happen To The Crypto Market?
Anticipated Situation: The FOMC may confirm current expectations that a rate reduction would be the following policy action, a move that Altrichter refers to as the “Expected Scenario.” He discusses the possible effects of this scenario: The demonstration is still going strong. Although the Fed’s reversal on rate rises is not a significant positive catalyst, equities should still benefit from it, according to Altrichter.
Within this framework, he expects the S&P 500 to rise by less than 1%, treasury yields to decline by fewer than ten basis points, and the dollar’s value to decline by less than 1%. As the perceived danger from tightening monetary policy decreases, this might translate into stable or somewhat favorable conditions for the cryptocurrency market.
Hawkish Scenario: If the Fed raises rates in reaction to inflation worries, this would be a more worrisome development for bulls. Altrichter warns: “All 11 SPDRs should be lower, with defensive stocks falling less (outperforming) and the SPX dropping hard by more than 1% if Powell upgrades the statement about inflation or says rate hikes are still being considered.”
Due to this reaction, treasury yields could rise 10–20 basis points, and the dollar could become much more potent (perhaps even breaking 107). An increase in interest rates generally encourages a risk-off attitude, which causes investors to retreat from high-risk assets like digital currencies. Therefore, such an environment could be harmful to cryptocurrencies.
Dovish Scenario: On the other hand, under the “Dovish Scenario,” the Fed would ignore the recent jumps in inflation and instead concentrate on either keeping rates unchanged or getting ready to decrease them. Altrichter optimistically describes this Result as follows: “No change in inflation language. Powell continued to emphasize the two possible courses of action—cut or hold—and wrote off the recent jump in inflation as temporary (I doubt he will use this phrase).
He sees a strong rebound in the S&P 500, possibly surpassing 5,200, with notable gains in growth and technology stocks. Lower interest rates can make non-yielding assets more alluring, resulting in a spike in investment in the cryptocurrency market.
Because cryptocurrencies respond very quickly to macroeconomic data, they are especially vulnerable to the Fed’s stance and choices. A dovish shift from the Fed might stimulate the cryptocurrency markets and cause rallies like those that have historically occurred during low-interest rate periods. A hawkish approach, however, would intensify the negative trends and cause investors to flee to more conventional assets, which would drive down cryptocurrency prices.
In her concluding remarks, Altrichter makes a compelling case for the significance of the May meeting, saying, “The FOMC needs to reinforce that the next move in rates will unquestionably be a cut.”
Macro analyst Ted (@tedtalksmacro) concurred with Altrichter regarding the immediate consequences. “We re-run the March FOMC playbook, in my opinion, and any potential hawkishness has already been priced,” he said. This indicates that the cryptocurrency market has a brief uptick before trending downward and reaching new lows.
