Bitcoin and other cryptocurrencies have remained in a tight range in the past few weeks. BTC was trading at $26,670 on Monday while Ethereum was stuck at $1,630. This consolidation happened as demand remained significantly lower. The Federal Reserve decision will be the key event to watch this week that will impact top tokens like ApeCoin, Solana, XRP, and Hifi Finance.
Federal Reserve decision
The biggest event in the financial market is the upcoming Federal Reserve interest rate decision. This will be a crucial decision for several reasons. First, there are signs that the labor market is softening.
Data published earlier this month showed that the unemployment rate jumped to 3.8% in August as the economy created over 189k jobs. The jobless rate bottomed at 3.5% a few months ago and has been rising gradually since then
Second, America’s inflation has started rising again. According to the Bureau of Labor Statistics (BLS), the headline consumer price index (CPI) rose from 3.2% in July to 3.8% in August. This price jumped as the price of gasoline soared during the month.
Analysts believe that gas prices will continue rising as crude oil prices rebound. Brent, the international benchmark, rose to $93 after bottoming at $60 a few months ago. This means it has moved into a bull market recently.
Second, the UAW strike is still ongoing and experts see it going on for a few more weeks. This strike will likely lead to higher inflation in the automobile industry and weak economic growth. The automobile industry is one of the key pillars of the American economy.
Therefore, there is a likelihood that the Federal Reserve will deliver a hawkish pause in its Wednesday meeting. Some analysts believe that the bank could deliver one more hike.
Impact on Bitcoin and altcoins
The actions of the Federal Reserve have an impact on Bitcoin and altcoins like ApeCoin, Solana, XRP,. and Hifi Finance. In most periods, these cryptocurrencies rise when the Fed is either cutting rates or when it has embraced a dovish tone.
Therefore, a decision to pause rate hikes could be seen as a bullish catalyst for the coins. Similarly, a dovish hike, where the bank decides to boost them by 0.25% and then point to cuts would be positive for crypto.
On the other hand, a hawkish pause will likely drag cryptocurrencies lower prices. For one, it will lead to a higher US dollar and higher money market fund yields. Higher yields will lead to a rotation from risky assets like Bitcoin to the safety of the greenback.