The cryptocurrency rally paused on Tuesday ahead of Wednesday’s Federal Reserve decision.
After briefly topping $76,000 overnight, bitcoin it retreated to around $74,000 during the US session, modestly higher in the last 24 hours.
Cryptocurrency stocks mostly posted modest gains, with stablecoin issuer Circle (CRCL) and bitcoin miner Bitdeer (BTDR) gaining 5% and 12%, respectively. The Nasdaq closed with a 0.5% gain and the S&P 500 rose 0.25%.
The Federal Reserve is almost universally expected to leave benchmark interest rates unchanged at 3.50%-3.75% tomorrow. But given the rapid rise in oil prices and their potential effect on inflation thanks to the war in Iran, attention is shifting to Jerome Powell’s messaging and policymakers’ outlook on future rates.
Bitfinex analysts said the key question is whether policymakers are still signaling rate cuts in 2026 or are moving toward no more monetary easing. A more hawkish outcome could weigh on risk assets by strengthening the dollar, they said.
Powell’s view on oil’s recent rally will also be the subject of attention. Treating it as a temporary shock would support confidence, while a more stagflationary view could limit the Fed’s flexibility.
The February Producer Price Index report will also be released on Wednesday. Generally, having almost no weight from the Consumer Price Index, the PPI will be watched a little more closely given its timing leading up to the Federal Reserve meeting.
“A high PPI number followed by an aggressive FOMC would be the most damaging combination for stocks and risk assets,” the Bitfinex team continued.
That context is already being reflected in market expectations towards a path of higher rates for longer, according to Vetle Lunde, head of research at K33.
The probability of rates remaining unchanged until the July meeting has risen to more than 60% from 22% last month, and potential cuts are now postponed until late 2026, he said in a note on Tuesday.
For now, the price action is likely to remain muted. “We expect the $74,000 to $76,000 region to cap the price momentarily,” Bitfinex analysts concluded.
