It’s FOMC day again today for cryptocurrencies and the broader financial markets. Analysts agree that today’s meeting will be one of the most important in recent years. Financial advisor and Ivory Hill founder Kurt S. Altrichter even described today’s FOMC meeting as “the most important meeting of your lifetime.” In a new post on X, Altrichter explains why.
FOMC Preview
At the heart of today’s FOMC meeting is the possibility that the Fed will hint at a September rate cut. Altrichter said financial markets are almost unanimous in anticipating such a move, with federal funds futures showing such an outcome is all but certain. “Market expectations are strongly signaling a September rate cut,” Altrichter said, noting that today’s update is a critical moment for financial markets.
The key question today is: "How strong is the Fed's signal of a September rate cut?" Experts explain. Investors should pay close attention to the FOMC statement at 2 pm ET, especially the third paragraph, which may subtly hint at the Fed's confidence in achieving its inflation target.
Altrichter suggested, "Look at this key sentence in the third paragraph: The Committee believes that it would be inappropriate to lower the target range unless there is greater confidence that inflation will move sustainably toward 2 percent." Any revision to this sentence would be a clear signal that the Fed is getting closer to its inflation control target, which could pave the way for interest rate adjustments.
Altrichter outlined several possible outcomes of the meeting, each associated with a specific market reaction. In the dovish scenario, the Fed hints at a rate cut in September. Altrichter then expects a broad market rebound, especially in sectors that are less sensitive to interest rates. “Yields and the dollar should fall slightly, and commodity prices should rise slightly,” Altrichter predicted, suggesting big moves in both standard and sector-specific indices.
In the hawkish scenario, there will be no change in the U.S. central bank's forward guidance. If the Fed maintains its current stance and does not hint at future rate cuts, the market could fall. "Watch out below, expect a big drop. The S&P 500 should fall 1-2%," he warned, adding that technology and growth sectors could perform relatively well because they are attractive during periods of high yields.
How will Bitcoin and cryptocurrencies react?
Potential adjustments in U.S. monetary policy will have a direct impact on the Bitcoin and cryptocurrency markets. Cryptocurrencies are often viewed as alternative investments that are sensitive to changes in monetary policy, especially in terms of interest rates.
If the dovish stance materializes, it could make Bitcoin and cryptocurrencies more attractive. Signals of lower interest rates in the future could drive increased investment in the cryptocurrency market, potentially leading to higher prices as investors seek higher returns in alternative assets.
Conversely, if the Fed expresses reluctance to cut rates, indicating a stronger economic outlook or concerns about inflation, this could push up the dollar and increase yields on traditional financial instruments. Such an environment could lead to a correction in the cryptocurrency market as the comparative advantage of Bitcoin and cryptocurrencies weakens relative to rising traditional yields.
Max Schwartzman, CEO of Bitcoin, commented via X: “The FOMC meets today, which is very important as we are heading into the end of the Fed cycle… Here’s how the past 11 meetings have progressed for Bitcoin…”
Bitcoin's past 11 reactions
Today’s FOMC meeting is therefore a watershed moment for global financial markets, with major implications for both traditional and crypto markets. As Altrichter succinctly puts it, “The September Fed rate cut fueled the 2024 bull run. Tomorrow’s meeting will either reinforce that tailwind or refute it. If the Fed signals a rate cut, the rally will continue. No signal: markets are likely to go south.”
At press time, BTC is trading at $66,462.
