Will Bitcoin Price See Correction Ahead Of Key FOMC Decision?

The US Federal Reserve’s Federal Open Market Committee (FOMC) is set to convene next week between March 21-22, 2023. While the central bank will have to address the issue of containing inflation, it will also have to factor in the banking crisis. At an annual rate of 6%, the consumer price index in the United States, the Fed is still far away from reaching the 2% target. The central bank will also consider measures to protect investors if in case the bank crisis worsens over the coming weeks.

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Owing to the rising interest rates over the last 12 months, the banking sector took a hit as their investments in municipal bonds, treasuries and securities turned less profitable. Meanwhile, the crypto market is showing no signs of FUD from the banking collapse as Bitcoin price rose heavily over the last one week. However, previous instances of price correction ahead of the Fed meetings could repeat ahead of next week’s decision.

No Hike Possibility

Although the market anticipation sentiment has changed with the banking crisis dynamics, a rate hike of 25 bps could well be bullish for the crypto ecosystem as it goes against the Fed Chair’s recent comment on acceleration of rate hikes. Jerome Powell spoke in the context of stronger economic data and potential higher inflation. This could also mean continuation of bank shares trading in the red, hence the rise in crypto prices.

However, analysts are also predicting that the Fed could chose to pause the increase this time, although the target probability could change ahead of the meeting. Currently, the CME FedWatch Tool, which gauges probability of the Federal target rate, shows a 38% chance of no hike and 63% of 25 bps rise in the upcoming meeting. With the rising dynamics in the macro environment and the banking sector, Bitcoin price could see sideways movement or a small correction in the lead up to the meeting.

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