Bitcoin has fallen more than 11% in the last 7 days. After a small rally, Ethereum falls again and drops below $1.35K. Altcoins continue to plunge as the Fed continues to keep macro conditions unfavorable for crypto.
The Federal Reserve will make a major decision tomorrow that will dictate the market for risk assets. The Federal Open Market Committee will make its decision on the next interest rate hike. The FOMC is the Federal Reserve’s monetary policy-making body.
According to Bloomberg, Wall Street traders now expect a 75 basis point hike and have already priced in a 100 basis point hike. The CME’s Fed Watch tool highlights an 82 percent probability of a 75 basis point hike and an 18 percent probability of a 100 basis point hike.
How are crypto-currency traders preparing for the Fed’s major decision?
The majority of crypto-currency traders are expecting a 75 basis point hike. Many experts believe that a 75 basis point hike will actually lead to a rally in crypto-currencies, as it is fully priced in. Indeed, there is historical precedent for this price movement.
In June, when the Fed raised interest rates by an unusually high 75 basis points, it led to a bloodbath in the crypto-currency market. Bitcoin experienced its worst financial quarter in over a decade. However, a similarly sized hike in July had no negative impact on the market. In fact, the markets jumped after an initial slide.
JP Morgan already believes that the risk asset market has bottomed out. However, if the Fed goes ahead with a 100 basis point hike, the markets may fall again.
When will the decision be made?
The Federal Open Market Committee will decide on the next interest rate hike at the FOMC meeting tomorrow.