FOMC (Federal Open Market Committee) meetings are held eight times a year, and like any other financial market, the results of each meeting affect Bitcoin and others. Announcements following the FOMC meeting will show whether interest rates have changed or remain the same. Now another FOMC meeting has occurred and markets are already speculating what will happen next.
Next FOMC and expectations
The next FOMC meeting is scheduled for June 16 and 17, after which Federal Reserve Chairman Jerome Powell is expected to deliver a speech outlining the results of the meeting. At the FOMC meeting held on April 28-29, the Federal Reserve kept interest rates at the same level, and expectations appear to be following the same trajectory once again.
CME’s FedWatch tool tracks market-wide sentiment and displays a graph showing interest rate changes or the probability that the Fed will keep rates the same. According to the tool, the market still expects the Fed to keep interest rates at the same level.
Current rates are between 3.5 and 3.75 percent (or 350 and 370 basis points), and there is a 99.4 percent chance the Fed will keep rates the same, according to the tool. The remaining 6% actually increases interest rates to 3.75-4.00%, or 370-400 basis points, in the Fed’s favor. On the other hand, the probability that the Federal Reserve will cut the interest rate to 3.25-3.50% is 0%.
What will happen to Bitcoin depending on what the Fed does?
Depending on what the Federal Reserve announces after the FOMC meeting, the Bitcoin price tends to react very differently. If the odds are correct and interest rates remain the same, the Bitcoin price is expected to continue following the same trajectory it is currently on. Because at this point, investors have no incentive to change their positions.
If the Fed ends up raising interest rates, it could have a very negative impact on the markets. This is because higher interest rates make investors less willing to take risks, which reduces liquidity flowing into Bitcoin. It also tends to trigger sell-offs as investors rush to reduce the risk of losing money.
On the other hand, the Fed is actually lowering interest rates. This is the most optimistic scenario for Bitcoin because low interest rates encourage investment in risky assets. In such cases, Bitcoin prices are likely to rise as investors move into the digital asset.
Featured image by Dall.E, chart by TradingView.com
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