- Bitcoin price hovers around $255.8K ahead of Fed announcement.
- Fed expected to change interest rate policy after aggressive hikes.
- SEC lawsuit brings uncertainty but could lead to new cryptocurrency investments.
Bitcoin price is hovering around $255.8K, well within the recent intraday range ahead of the Federal Reserve’s key policy announcement on Wednesday.
The U.S. Federal Reserve is expected to break the aggressive rate-hiking cycle that began in March last year, pushing bank rates by 500 basis points (5.0% to 5.25%) at its last 10 meetings.
The Fed will release its latest economic forecasts and new dot plots alongside its usual policy statements and press conferences following its meeting with Fed Chairman Powell.
The scatterplot summarizes Fed policymakers’ predictions of what interest rates will be in the next few years.
Wednesday’s meeting has been touted as likely to trigger significant volatility in the cryptocurrency market, with two additional forward-looking factors detailing Fed policymakers’ expectations of the economic and financial outlook. Bitcoin rose at least temporarily as inflation eased, as reflected in Tuesday’s May Consumer Price Index (CPI) release.
The cryptocurrency with the highest market value recently traded at $25,846, down 0.2% over the past 24 hours, far from the US one-hour high above $26,000. The CPI rose 4%, 4.1% above expectations of $26,000 and up from 4.9% in April, according to the Bureau of Labor Statistics.
Investors worry over SEC’s lawsuit
BTC is also up as investors put aside concerns about the Securities and Exchange Commission (SEC) lawsuit against crypto exchanges Binance and Coinbase and focus on waiting for the latest inflation figures and a federal interest rate decision on Wednesday. has been stagnant below $26,000 for most of the past four days.
The U.S. inflation rate released on June 13 was slightly below the 4.1% forecast for May, with the consumer price index rising 4% year-on-year.
Core CPI, which excludes volatile sectors such as food and energy, rose 5.3%, slightly above expectations of 5.2%. The major cryptocurrency immediately responded with a temporary price spike, pushing it from $26,200 to a three-day high just above $26,400. But in the minutes that followed, the asset lost almost all traction.
What you should know
It’s worth noting that previous CPI releases have seen BTC more volatile, with some registering massive four-digit gains.
A drop in the CPI reading could mean that the US Federal Reserve is finally deviating from its monetary policy of raising rates, which is seen as a positive sign for risk assets like BTC.
Now it seems likely that the Fed will end a year of tight monetary policy. Just a year ago, with the CPI at 8.6%, the Federal Reserve hiked interest rates by 75 basis points (bps), prompting a surge in risk assets.
Experts say the SEC lawsuit has brought “safety” to the market by ending speculation over whether the SEC will take legal action against two of the most prominent companies in the cryptocurrency industry. I’m guessing not. The lawsuit could also force courts and regulators to agree to classify cryptocurrencies as securities, commodities, or other.
U.S. investors may be largely out of these assets now, so new investments in these tokens that are completely unrelated to the U.S. economy or U.S. politics may begin.
