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Bitcoin and other cryptocurrencies on the market have had an interesting week and a half. From the CPI report to the completion of the Ethereum merger, it has been a rollercoaster of volatile activity in the market. Even with this, the market is still not done with its major events. Wednesday is the FOMC meeting, which, as in the past, promises unpredictable moves for the crypto markets.
Expect volatility for Bitcoin
The FOMC meeting has always led to volatility not only in the crypto markets, but also in various financial markets. Bitcoin’s response to the FOMC meeting has also become more prominent due to its increased correlation with the stock and macro markets. Therefore, each FOMC meeting is expected to have a significant impact on the crypto market.
This is no different from the FOMC meeting that takes place on Tuesday. Previously, FOMC meeting hours have been very volatile in the room as the market waits for the meeting results. As such, Wednesday is expected to see a lot of volatility, especially during meeting hours. More specifically, volatility is expected to peak between 17:00-21:00 UTC, as observed in previous meetings.
Volatility expected during FOMC meeting | Source: Arcane Research
Naturally, the price of bitcoin will react to the stock indices during this time and tend to move with it. So while investors keep an eye on the crypto market, it makes sense to keep an eye on the macro markets during this time as well.
High fluctuations in crypto
The reaction of bitcoin and other cryptocurrencies may vary during this time, but the wild swings are to be expected. This time around, volatility is also expected to be very high, as there is uncertainty in the markets about whether there will be further rate hikes or not.
It actually gives an idea of the importance of the FOMC meeting for various financial markets and now the crypto market as it becomes a bigger contender. There are currently reports of an expected rate hike of 100 basis points. The market has responded by pricing a 20% chance of such an increase.
BTC remains below $20,000 | Source: BTCUSD on TradingView.com
Interestingly, the FOMC meeting volatility does not seem to last beyond the end of the meeting. In some cases it has lasted a few more hours, but the next day volatility usually decreases and normalizes.
So in the end, the volatility of this meeting doesn’t have much relevance over a longer period of time. It often acts as a cue to traders on how to build trades during this time. However, if interest rate hikes continue, the price of bitcoin could fall below $18,000 for the second time this year.
Featured image from Yahoo Money, charts from Arcane Research and TradingView.com
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