Cryptocurrencies wait for the Fed decision

The Federal Open Market Committee will deliver its July interest rate decision on Wednesday, a move that could impact Bitcoin and other crypto prices.

The Federal Open Market Committee (FOMC) will deliver its highly anticipated July interest rate decision on Wednesday, a move that could impact Bitcoin (BTC) and other cryptocurrency prices.

Most major cryptocurrencies traded in a tight range on Wednesday morning ahead of the FOMC decision. The price of Bitcoin hovered around $66,300, down from this week’s high of $70,000. Meanwhile, Ethereum traded at $3,320.

The market cap of all cryptocurrencies rose by 0.78% over the past 24 hours to reach $2.38 trillion. Some of the best-performing altcoins of the day included Mog Coin (MOG), Kaspa (KAS), and XRP, which were trading up by less than 6%.

Economists are pricing in a no-change decision from the Fed, which will leave interest rates in a range of 5.50% to 5.25%. According to Polymarket, only 4% of participants in a $2.4 million pool expect the bank to slash rates by 25 basis points.

This meeting will be crucial as economists are also expecting the central bank to provide guidance on when rate cuts will start.

With inflation falling for three consecutive months and the unemployment rate rising, the Fed may hint at a September cut. Alternatively, the bank could maintain its data-dependence stance, awaiting cues from Friday’s non-farm payrolls report and the next consumer price index reading before providing guidance at the annual Jackson Hole Symposium.

The actions of the FOMC impact all assets. For instance, in 2020 and 2021, Bitcoin and other altcoins rallied as the bank slashed rates to zero. However, they reversed in 2022 as the bank began increasing its benchmark rates.

One reason why Bitcoin and other coins may perform well once the Fed starts cutting interest rates is that investors have piled trillions into low-risk assets. As investors benefited from an average return of 5%, money market funds have accumulated over $6.1 trillion in assets.

As interest rates begin to fall, these assets will become less appealing. Consequently, there may be a shift towards riskier assets, such as stocks, crypto, and Bitcoin ETFs.

However, the impact on cryptocurrencies at this meeting is likely to be minimal, considering that the rate pause has been priced in. As observed in previous Fed decisions, there has been no significant effect on Bitcoin prices.

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