Cryptos, stocks slide as markets brace for upcoming Fed decision
Bitcoin and ether extended their selloff Tuesday while stocks pared gains
Joseph Wang | Photo by Ben Solomon Photo LLC for Blockworks
Cryptocurrencies fell and US equities slid Tuesday during pre-US market trading as participants braced for Wednesday’s update from the Federal Reserve.
Bitcoin (BTC) lost 8% to trade around $62,500, according to Coinbase. The largest cryptocurrency is now down about 17% from the all-time high set earlier this month.
Analysts say it’s not time to panic just yet, though, as a 20%-30% decline is typical for bitcoin after posting a record-setting price.
Ether (ETH) also extended its selloff, dipping around 11% Tuesday to trade around $3,200, per Coinbase.
The S&P 500 and Nasdaq Composite futures lost 0.4% and 0.5% Tuesday morning, respectively, ahead of the open, after the indexes both closed higher Monday.
The Fed’s policy-setting meeting wraps Wednesday. While markets are overwhelmingly anticipating the central bank to hold interest rates, traders will have their eyes on forward guidance.
Read more: What banking sector uncertainty could mean for crypto markets
“In December, [the Fed] guided toward 3 rate cuts this year,” Joseph Wang, chief investment officer of Monetary Macro LLC, said Tuesday during a panel discussion at the Blockworks Digital Asset Summit in London. “But between then and now, inflation has been a bit higher than expected.”
Until recently, markets were pricing in as many as five to seven rate cuts before the end of 2024, Wang added, but recent data is no longer suggesting that is a reasonable expectation. Surprising the market is never something the Fed strives to do, but it also has a tendency to stick to its plan, Jonny Matthews, founder of Super Macro, said during Tuesday’s panel.
“[Central bankers] have a strong commitment to their forward guidance,” Matthews said. “If they don’t follow through with it, it loses credibility.”
Rate cuts this year are bound to happen, Matthews added, although he says the odds the Fed “gets far in this cutting cycle” before the end of the year are slim.
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