Bitcoin (BTC) and the broader crypto market are in the red to start the week as a hawkish Fed has put pressure on financial markets and caused investors to reevaluate their expectations of an early interest rate cut in 2024.
On Sunday, Federal Reserve Chair Jerome Powell sat for an interview with 60 Minutes, during which he doubled down on his message from last week that the central bank is taking a cautious approach to interest rate cuts as they monitor progress on reducing inflation.
The “danger of moving too soon is that the job’s not quite done, and that the really good readings we’ve had for the last six months somehow turn out not to be a true indicator of where inflation’s heading,” Powell said. “We don’t think that’s the case. But the prudent thing to do is to, is to just give it some time and see that the data continue to confirm that inflation is moving down to 2% in a sustainable way.”
He added that it’s unlikely that the Federal Open Market Committee (FOMC) “will reach that level of confidence” about inflation’s path by its March 19-20 meeting, echoing remarks he made at a press conference on Wednesday.
The CME FedWatch Tool now shows that the market sees a 63.3% chance of a rate cut during the May FOMC meeting, but only a 14.5% chance of a cut in March.
While the expectations for March and May have declined, both the market and Powell see a rate cut coming sometime in 2024.
“All but a couple of our participants do believe it will be appropriate for us to begin to dial back the restrictive stance by cutting rates this year,” Powell said. “And so, it is certainly the base case that, that we will do that. We’re just trying to pick the right time, given the overall context.”
Data provided by TradingView shows that Bitcoin’s price dipped to support at $42,230 following Powell’s comments on Sunday. Bulls attempted to reverse course and managed to push BTC back to resistance at $43,500 in the early hours on Monday, but ran out of steam, allowing bears to smash it back down to $42,600, where it trades at the time of writing.
BTC/USD Chart by TradingView
While Bitcoin is struggling below $45,000 to start the week, market analyst Rekt Capital said things could soon start to improve as BTC's historical price performance suggests it could start the next leg of its pre-halving rally as soon as next week.
#BTC
If history is any indication then Bitcoin should begin its Pre-Halving Rally as soon as next week$BTC #Crypto #Bitcoin pic.twitter.com/zfQJqsVXsL— Rekt Capital (@rektcapital) February 5, 2024
