Following the release of key indicators, the bitcoin market is currently experiencing bearish sentiment as analysts anticipate a potential pause in the Federal Reserve’s hawkish rate hike stance. This shift in the market’s dynamics has led to caution among investors and increased uncertainty in the cryptocurrency space.
According to market analyst Jamie Dutta of Vantage, key indicators have shown signs of cooling, leading to speculation that the Fed will not raise interest rates at the upcoming meeting. However, policymakers may face a challenge as the 3-month, 6-month and 12-month core readings show no significant downward pressure.
Analysts Opinion
The recent release of U.S. inflation data was a key factor in the formation of market expectations. While the core inflation figure, which excludes volatile food and energy prices, was in line with expectations, the headline reading was lower than estimated. For this reason, market researchers are increasingly confident that the Fed will not raise interest rates.
source: tradingeconomics.com
The core inflation number, which is closely watched by investors, has shown a consistent monthly increase of 0.4% for the past two months, in line with the average observed since June of last year. Since the price of gas also decreased by 20% compared to last year, this also can be connected to the decline. In addition, food inflation, which had been on a significant rise, has started to cool down in the last few months — in the last three months it shows a declining trend.
Hawkish Scenario
As a result, money markets are now pricing in a minimal chance of a rate hike at the upcoming meeting. Market expectations are for a hawkish “skip” scenario. Analysts expect the Federal Open Market Committee (FOMC) to take its time to assess the lagged effects of its most aggressive policy tightening in over four decades.
“Money markets now see very little chance of a rate move tomorrow with a hawkish “skip” forecast by markets. The FOMC are expected to take time to assess the lagged effects of the most aggressive policy tightening seen in over 40 years.”
– Dutta said yesterday in a Press Release.
However, persistently elevated inflationary pressures and the lack of significant downward momentum in core readings over 3, 6 and 12 months pose challenges for policymakers. These factors may influence the Fed’s decision-making process beyond the immediate meeting, potentially leading to a rate hike in July. In addition, the robustness of the labor market has also influenced the Fed’s deliberations, particularly in the services sector, excluding housing, which is its preferred metric.
Bitcoin Market Sentiment
While the prevailing sentiment in the bitcoin market remains bearish, it is crucial to closely monitor the Federal Reserve’s actions and statements. Unforeseen factors and shifts in sentiment can quickly reshape the market landscape. Monitoring the macroeconomic indicators, such as the Federal Reserve’s monetary policy decisions, will provide information about the future of the Bitcoin price and crypto markets. The analysis provided by Jamie Dutta offers important perspectives on the current market situation and sheds light on the intricate dynamics that shape the Federal Reserve’s decision-making process.
In addition, investors should also consider monitoring the Fear and Greed Bitcoin Index, which provides insights into market sentiment and serves as a useful gauge of investor psychology. This index takes into account several factors, including price volatility, trading volume, social media sentiment, and market momentum as well. Understanding the Fear and Greed Bitcoin Index can provide valuable guidance in assessing the overall sentiment and potential market direction in the Bitcoin ecosystem.
Currently, the Fear and Greed Index is at 46, which means that there may be a level of caution or uncertainty among investors. It implies that market participants may be more hesitant or risk averse, potentially leading to a more conservative approach in their investment decisions.