The crypto market could face more volatility during today’s trading session. Federal Reserve USA will hold its Federal Open Market Committee FOMC meeting. They may also announce hardline measures to fight inflation.
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According to inflation data, the U.S. has seen its highest levels in over 40 years. Investors expect that the financial institution will announce a hawkish policy in order to bring down the inflation, which is negatively impacting crypto markets and other risk-on assets.
Bitcoin barely hangs above $20,000 at the time this is written and has suffered a 33% drop in value over the past week. Ethereum suffers a 40% drop in trading volume over this same period, with smaller currencies like Bitcoin and Ripple also losing.
QCP Capital posted recently a market update that highlighted panic within the crypto market. Major crypto companies fell short of their financial obligations as Bitcoin and larger cryptocurrencies became more volatile.
Following a disastrous Terra ecosystem meltdown, the recent events set up a soft market for more losses. The lending platform Celsius has halted withdrawals and Coinbase, BlockFi have fired 18%.
Brian Armstrong, Coinbase CEO, warned of an economic downturn in a letter to employees. These events led to crypto market declines. QCP Capital said that:
This is a record level for the year and reflects the panic that the market feels as it heads into FOMC within a matter of hours. The market has raised its expectations of the FOMC rate increase from 50 to 75 basis points. Markets worry that the Fed could be prioritizing inflation rather than concerns about recession.
The FED can also choose to end inflation, even if it means that the traditional market will continue to be flooded with blood.
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QCP Capital is optimistic that there will be short-term relief. The large number of positions in leverage that were liquidated during the recent downturn could support this move to the upside.
Bitcoin’s trading is also above its all-time peak, which often acts as an area of major support. Bulls could have more time to breathe as the selling pressure falls. QCP Capital has been added
The market appears to be at its maximum bearishness and any Fed dovish signal could prompt a brief squeeze. Even though everyone’s attention is on negative headlines and the markets could be caught off guard by a sudden move higher,
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In less than one hour, the FED meeting could see Bitcoin and crypto markets return to pre-2020 levels. This could see BTC’s price trading in the $10,000 levels, but as of right now, $20,000 is holding.