Fed Preview: Stock, Crypto Rally Relies on Dovish Fed

If Powell and the committee signal a forthcoming pause in interest rate hikes, markets will react favorably, but a hawkish stance will likely send shares plummeting again

article-image

Federal Reserve Chair Jerome Powell | Brookings Institute/"Jerome Powell" (CC license)

share

Equities and crypto stayed in the green early in Tuesday’s trading session as markets bet on the central bank opting for a slower-paced interest rate increase, but investors should remain cautious, analysts advise. 

The S&P 500 and Nasdaq Composite indexes each locked in around a 0.5% gain Tuesday morning in New York, putting their monthly gains around 4.5% and 10%, respectively. Bitcoin and ether also each rallied around 1% Tuesday, making their January returns around 40% and 32%, respectively. 

After 2022’s losses, the returns are welcome, but tomorrow’s rate decision and Federal Reserve Chair Jerome Powell’s comments on the state of the economy will set the stage for future market moves. 

“We’re rallying year-to-date due to the belief that the Fed will soon stop tightening, but we’re not yet out of the woods,” Jessica Rabe, co-founder of DataTrek Research, said.

“The [Federal Open Markets Committee] FOMC and Chair Powell’s communications this week will set the tenor for stocks ahead.”

Powell could take a more hawkish stance in his remarks Wednesday and emphasize the need to re-tighten financial conditions based on economic data, which may spook markets, Nauman Sheikh, head of treasury management at cryptoasset management firm Wave Financial, said.

“Year to date, the market has reacted strongly across risk assets, much of it driven by short squeezes and underweight positioning,” Sheikh said. “There-in lies the key risk going into the Fed meeting. The market may have gotten ahead of itself for the Fed’s liking.”

If Powell and the committee signal a forthcoming pause in interest rate hikes, markets will react favorably, Tom Essaye, founder of Sevens Report Research, said. 

“The stakes for the market are clear,” Essaye said. “Stocks have rallied on the expectation of a near-term Fed pause (possibly announced in March after one more 25-bps hike, at least according to the market) and that the pause will lead to rate cuts later in 2023 as the economy slows.”

The FOMC kicked off its two-day policy-setting meeting Tuesday and is scheduled to release its interest rate decision and statement at 2 pm ET Wednesday. Powell’s press conference is expected to start at 2:30 pm ET Wednesday.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 24 - 26, 2026

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Unlocked by Template.png

Research

The march toward an interoperable and onchain-by-default internet depends on reliable messaging and value transfer across heterogeneous domains. Crosschain protocols now process >$1.3T in combined annual transfer volume and secure tens of millions of user interactions, yet no single design dominates.

article-image

The goal, per Santiago Santos, is to make crypto a relatable piece of tech for people who may not even understand it

article-image

Stripe stablecoin unit aims to operate under a federal charter enabling regulated stablecoin issuance and custody services

by Blockworks /
article-image

Will TradFi make crypto better or create more problems than it solves?

article-image

Subtle decisions by risk curators saved Aave from significant turmoil

article-image

The new Rootstock Institutional unit aims to connect professional investors to Bitcoin-native yield and liquidity strategies anchored in BTC’s security layer

by Blockworks /
article-image

DOJ files record civil forfeiture against more than 127,000 BTC linked to scam activity

by Blockworks /