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Bitfinex analysts noted that a combination of strong PPI inflation data in the morning and hawkish comments from Powell in the afternoon could be detrimental to risk assets, including cryptocurrencies.
Federal Reserve Chair Powell holds monthly press conference (Photo by Alex Wong/Getty Images)
What to know:
- Bitcoin retraced to approximately $74,000 on Tuesday, unable to maintain an overnight increase towards the $76,000 range.
- While no expectations exist for the Fed to alter rates during its Wednesday meeting, the tone from the bank and Chairman Jerome Powell regarding inflation could act as a catalyst.
- A hawkish stance combined with elevated PPI inflation data might pressure equities and cryptocurrencies, though Powell’s indication that the Fed views rising oil prices as a temporary phenomenon could support the crypto ascent, analysts noted.
The cryptocurrency rally paused on Tuesday, awaiting the Federal Reserve’s decision on Wednesday.
After briefly surpassing $76,000 overnight, bitcoin dropped back to around $74,000 during the U.S. trading session, reflecting a slight increase over the previous 24 hours.
Most cryptocurrency stocks recorded minor gains, with stablecoin issuer Circle (CRCL) and bitcoin miner Bitdeer (BTDR) notably rising by 5% and 12%, respectively. The Nasdaq finished with a 0.5% increase, while the S&P 500 gained 0.25%.
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It is widely anticipated that the Fed will keep benchmark interest rates steady at 3.50%-3.75% during tomorrow’s meeting. However, due to the rapid rise in oil prices and their potential impact on inflation amid the conflict in Iran, attention now turns to Jerome Powell’s messaging and the policymakers’ perspective on future rates.
Bitfinex analysts emphasized that the pivotal question is whether policymakers continue to indicate rate cuts in 2026 or are leaning towards maintaining current monetary conditions. A more hawkish outcome could negatively impact risk assets by bolstering the dollar, they stated.
Powell’s assessment of the recent increase in oil prices will also be scrutinized. Considering it a temporary shock could enhance market sentiment, whereas a more stagflationary perspective might restrict the Fed’s flexibility.
Additionally, the February Producer Price Index report is expected on Wednesday. Typically, this report holds less significance than the Consumer Price Index, but its timing before the Fed meeting makes it more closely monitored.
"A strong PPI result followed by a hawkish FOMC would represent the most detrimental scenario for equities and risk assets," the Bitfinex team added.
This backdrop is already reflected in market expectations for a prolonged higher interest rate trajectory, according to Vetle Lunde, head of research at K33.
The likelihood of rates remaining unchanged through the July meeting has surged to over 60% from 22% last month, with potential cuts now anticipated further into late 2026, he noted in a Tuesday update.
For the time being, price movements are expected to remain subdued. "We anticipate the $74,000–$76,000 range will temporarily limit price movements," Bitfinex analysts concluded.
