In summary
- Bitcoin price hit record highs this month, boosted by Trump’s election, as investors await Fed minutes.
- The likelihood of a rate cut in December is uncertain as analysts consider a more cautious approach from the Fed.
- The PCE data could influence Bitcoin price, with a softer inflation reading potentially improving its chances of breaking $100,000.
The price of Bitcoin has seen a notable rise this month to all-time highs as investors adjust to the election of President Donald Trump. However, markets are braced for the Federal Reserve’s minutes on Tuesday, which could provide clues as to whether the US central bank’s monetary easing campaign will continue unchanged.
Earlier this month, the Fed cut its benchmark interest rate by a quarter of a percentage point, following a significant half-percentage point cut in September. Although these reductions have boosted so-called risk assets, investors are divided over whether there will be a third cut.
At the time of writing, Fed futures traders saw a 43% chance that the Fed will keep rates unchanged at its last meeting of the year ending December 18, according to the CME Group’s FedWatch tool. In other words, the prospects for a rate cut in December are relatively uncertain compared to the two previous US central bank monetary policy meetings that had brought good news for cryptocurrencies.
Lower interest rates are typically favorable for risky assets like stocks and cryptocurrencies, as low borrowing costs make them more attractive compared to returns on investments like cash and U.S. Treasuries. However, Analysts have told Decrypt that the Fed could take a more cautious approach, depending on how it assesses the uncertainty around Trump’s proposed tariffs.
Earlier this month, Fed Chair Jerome Powell said the central bank’s progress in bringing inflation down to its 2% target had been solid, but “it’s not there yet.” While he expected inflation to continue to moderate, he acknowledged it could be a “sometimes bumpy” road.
With the Fed’s latest policy meeting occurring after the election, Tuesday’s minutes “may reveal how the Fed is thinking about possible policy actions following Trump’s victory,” crypto market maker GSR wrote in a market update. .
At the same time, market participants will get a key data point on Wednesday when the U.S. Department of Commerce’s personal consumption expenditures (PCE) index is released. Measuring inflation in October, the US’s preferred measure of inflation The Fed is expected to show a 0.3% increase in prices that month, after moderating to 2.1% in the year ended in September.
According to BRN analyst Valentin Fournier, a softer inflation reading “could boost Bitcoin’s momentum and improve its chances of breaking the strong $100,000 resistance.” In a recent research note, he wrote that PCE expectations still leave “room for a positive surprise, which could strengthen the likelihood of another rate cut this year.”
Meanwhile, QCP analysts have noted that Bitcoin and Ethereum futures traders are leaning toward puts rather than calls, favoring bearish bets based on the assets’ implied volatility. Depending on what the Federal Reserve meeting minutes and PCE data reveal, this could lead to a decline in Cryptocurrency prices, as the “market takes a breather,” they wrote.
“Growing concerns about downside risks may intensify, particularly with FOMC minutes on Tuesday and PCE data on Wednesday,” QCP analysts wrote. “The market had become extremely overbought since the election with excessive leverage, making a pause inevitable.”
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