The crypto rally took a breather on Tuesday ahead of Wednesday’s Federal Reserve decision.
After briefly surpassing $76,000 overnight, Bitcoin returned to around $74,000 during the US session, up slightly over the past 24 hours.
Crypto stocks mostly posted modest gains, with stablecoin issuer Circle (CRCL) and bitcoin miner Bitdeer (BTDR) standouts rising 5% and 12%, respectively. The Nasdaq closed with a 0.5% gain and the S&P 500 rose 0.25%.
The Fed is almost universally expected to leave its benchmark interest rates unchanged between 3.50% and 3.75% tomorrow. But with oil prices rising rapidly and their possible effect on inflation thanks to the war in Iran, attention is now shifting to Jerome Powell’s message and policymakers’ outlook for future rates.
Bitfinex analysts said the key question is whether policymakers are still signaling rate cuts in 2026 or are moving toward no further easing of monetary policy. A more hawkish outcome could weigh on risk assets by strengthening the dollar, they said.
Powell’s views on the recent oil advance will also be in focus. Treating it as a temporary shock would support sentiment, while a more stagflationary view could limit the Fed’s flexibility.
The February Producer Price Index report will also be released on Wednesday. Generally not having the weight of the consumer price index, the PPI will be followed a little more closely given its timing before the Fed meeting.
“A rising PPI followed by a hawkish FOMC would be the most damaging combination for stocks and risk assets,” the Bitfinex team continued.
This context is already evident in market expectations for a higher and longer rate trajectory, according to Vetle Lunde, head of research at K33.
The likelihood that rates will remain unchanged until the July meeting has jumped to more than 60%, from 22% last month, with potential cuts now pushed back until the end of 2026, he said in a Tuesday note.
For now, price developments will likely remain moderate. “We expect the $74,000-$76,000 region to temporarily cap prices,” Bitfinex analysts concluded.
