Bitcoin Awaits Fed Statement

Bitcoin ($BTC) and other cryptocurrencies are entering a wait-and-see phase ahead of the U.S. Federal Reserve’s monetary policy statement this afternoon.

The Fed’s statement could hint at the central bank’s course of action with regard to its bond-buying policy and interest rates moving forward. Depending on their stance, the event might be a potential catalyst for crypto markets.

As reported by CoinDesk:

Bitcoin is holding in a tight range as the focus turns to Wednesday’s Federal Reserve’s monetary policy statement, which could offer clues on the central bank’s course of action and inject volatility into financial markets.

The cryptocurrency has been trading in a narrow range of $39,400 to $41,300 since Monday’s European trading hours, CoinDesk 20 data show.

“The market is completely neutral ahead of the Fed with only a little spot buying,” Brian Tehako, CIO at Warwick Capital Management, said. “Traders are waiting for the Fed announcement.”

The event is likely to have a binary market reaction, according to Singapore-based QCP Capital. Binary events are dramatic developments that trigger big moves in either direction.

“If the Fed remains dovish , cryptocurrencies would have the most upside potential until September at least, given the overselling we’ve seen relative to other macro markets since May’s CPI print,” QCP Capital noted in its Telegram channel.

Bitcoin tanked from $58,000 to nearly $30,000 in the eight days to May 19. The sell-off began after official data released on May 12 showed the U.S. consumer price index surged to the highest level in almost three years. That renewed fears of an early Fed taper – the gradual unwinding of the liquidity-boosting stimulus.

However, while bitcoin dropped in the wake of Fed tightening fears, traditional markets remained resilient, with gold ending May with a 7.8% gain. Equities also remained bid.

That’s left bitcoin and cryptocurrencies in general looking relatively cheap heading into the Fed, and could benefit them most on the back of a dovish outcome.

On the flip side, a hawkish surprise could weigh on asset prices. “If they’re hawkish on Wednesday, then all bets are off, and we would expect the market to revisit recent lows,” QCP Capital said.

Read the full article at coindesk.com.

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