Bitcoin traders brace for Fed hike, but a surprise hold could pose bigger risk
Bitcoin traders are preparing for a potential Federal Reserve interest rate hike, with markets pricing in a 92.5% probability of an increase. Investors are shifting capital into stablecoins to reduce risk, while volatility in major cryptocurrencies remains low ahead of the announcement.
Why it matters
Macroeconomic policy decisions by the Fed significantly influence market sentiment and liquidity in the cryptocurrency sector.
Markets are pricing a 92.5% chance the Fed raises rates for the first time in three years after strong employment data and stubborn inflation. Bitcoin has spent the past 24 days stuck between roughly $76,000 and $80,000, with volatility falling to a one-month low.
For some traders, the quarter-point hike is already old news.
“The bond market has done its job and fully priced in tomorrow’s hike,” said Chris Sullivan of Hyperion Decimus. In his view, the bigger shock could come if the Fed doesn't hike, since that could leave investors wondering what policymakers see that markets don't.
Crypto investors are still putting some money out of harm's way.
Talos has seen a 28% net buying tilt toward stablecoins ahead of the meeting, according to research analyst Cooper Duschang. Around previous Federal Open Market Committee meetings, investors showed an average 8% selling tilt toward stablecoins.
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