Crypto Markets on the Brink: FOMC Meeting Preview
As the financial world keenly anticipates the Federal Open Market Committee’s (FOMC) verdict on January 29, cryptocurrency investors stand at a pivotal crossroads. With the backdrop of President Donald Trump’s inaugural crypto-focused executive order and the recent DeepSeek price plunge, macroeconomic factors have returned to center stage.
Anticipating the FOMC’s Impact on the Crypto Market
Renowned crypto analyst Byzantine General, known on social media as @ByzGeneral, has identified a significant consolidation range for Bitcoin, spanning from $90,682 to $108,388. He predicts minimal price movement until the FOMC meeting concludes, proposing three potential market responses based on the Fed’s stance: a dovish surprise could trigger a breakout, while a neutral or hawkish outlook might result in prolonged price stagnation.
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Bitcoin’s Trading Dynamics
In the world of cryptocurrency, a dovish inclination—characterized by interest rate cuts or a prolonged pause—often serves as a catalyst for risk-on assets like Bitcoin. Byzantine General suggests that an unexpected dovish shift could potentially break the current trading stalemate. Conversely, a neutral or hawkish position could imply continued price stability within the current range.
Macroeconomic Context and Future Projections
Banking powerhouse ING has laid out the macroeconomic landscape that could influence the Fed’s decisions and forecasts for 2025. They note that after a 100-basis-point reduction in rates, the Fed seeks more concrete signs of economic slowdown and moderated inflation before further easing. President Trump’s policies, marked by low taxes and deregulation, are viewed as growth-friendly, while immigration controls and trade tariffs pose inflationary risks, potentially delaying further rate cuts.
Interest Rate Predictions
Following a 25-basis-point rate cut in December, the Fed hinted at a gradual easing path for 2025, potentially totaling just 50 basis points. ING highlights that robust economic performance and persistent inflationary pressures reduce the urgency for rapid rate reductions. They also acknowledge the possibility of the Fed adopting a more hawkish stance than publicly stated.
Economists at ING expect no policy shift on January 29, though they previously predicted a March rate cut, which now appears unlikely. The bank maintains its forecast of three rate cuts in 2025, contingent on a cooling labor market and easing wage pressures. Rising Treasury yields, higher borrowing costs, and a stronger dollar could tighten financial conditions, prompting the Fed to act later in the year.
Quantitative Tightening and Dollar Strength
Regarding quantitative tightening (QT), ING foresees the Fed potentially ending QT in 2025 if excess liquidity diminishes below comfort levels, pegging $3 trillion in reserves as a critical threshold. On currency markets, ING suggests that the dollar could maintain its strength if the Fed remains cautious about easing, with the December FOMC meeting bolstering the dollar’s bullish trajectory.
With President Trump’s second term underway, questions about the Fed’s independence have resurfaced. Chair Jerome Powell is expected to navigate inquiries regarding political influence at the upcoming FOMC meeting. Despite explicit pressure from Trump for rate cuts, Powell has historically deflected suggestions of political sway.
At the time of writing, the total cryptocurrency market capitalization stands at $3.45 trillion.
