Analysts predict “ hawkish rate hike suspension ” ── Bitcoin leans bearish | CoinDesk JAPAN | Coin Desk Japan

Bitcoin (BTC) traders are taking a defensive stance ahead of the US Federal Reserve (Fed) meeting on June 14. The Fed is expected to keep rates on hold while preserving the possibility of future increases in what some observers described as a “hawkish pause.”

The Federal Open Market Committee (FOMC) is scheduled to announce interest rates at 2:00 p.m. Chairman Jerome Powell will hold a press conference 30 minutes later.

Interest rate traders expect the Fed to keep the base rate, which has been raised by 5% since March 2022, stable in the 5% to 5.25% range, according to Federal Funds (FF) futures. A rapid rate hike cycle, combined with a shrinking balance sheet, destabilized risk assets, including crypto assets, last year.

However, the Fed is expected to signal that it may continue to tighten in the coming months. At press time, federal funds futures offered a little more than a 50% chance that the Fed would raise rates by another 0.25% in July. And the rate cut from the end of the year is factored into the forward rate curve.

Bitcoin-related puts outnumber bullish calls ahead of the Fed meeting, according to options risk reversal data tracked by Singapore-based cryptocurrency trading giant QCP Capital. traded at high prices. The put bias indicates a nervous mood in the market.

In an update released on the 13th, QCP Capital’s Market Insights team said, “At the FOMC, they will take a ‘hawkish pause’, i.e. pause at this meeting but interest rates will be reduced to appease hawkish members. We think the median forecast is higher, indicating a continued uplift bias.” “This week’s risk-reward balance favors a long put on BTC and Ethereum (ETH).”

The US headline consumer price index (CPI) fell to a two-year low of 4% in May, below the current federal funds rate. That gave the Fed room to keep rates stable at its meeting on Wednesday, according to QCP.

But both headline CPI and core PCE, the Fed’s favorite measure of inflation, are well above the Fed’s long-held target of 2%, leaving little room for the Fed to end its tightening cycle.

Moreover, positive inflation-adjusted interest rates, also called real interest rates, often weigh heavily on zero-yielding assets like gold and bitcoin.

“Positive real interest rates are generally unfavorable for such assets, and generally BTC is negatively correlated with real yields,” QCP added.

Risk Reversal tracks the implied volatility premium spread for out-of-the-money (OTM) calls and puts. A negative spread indicates a skewed put. (QCP Capital)

So far, some cryptocurrency traders have decided on their plans after watching the stock market movements after the Fed. However, that strategy may not work this time as Bitcoin’s correlation with the S&P 500 and Nasdaq stock indices has weakened recently.

Josh Olszewicz, head of research at investment firm Valkyrie Investments, said in a weekly market review released Wednesday that the Fed’s halt to rate hikes has already pushed the S&P 500 to year-to-date highs. We’re likely to be blessed by the stock bulls who have pushed them higher.” “Bitcoin and Ethereum have not benefited from the risk-on-equity environment in recent weeks, potentially hinting at fears about pending regulatory action.”

According to David Brickell, director of institutional sales at crypto-liquidity network Paradigm, consensus over a hawkish halt could allow Fed Chairman Powell to struggle to outmaneuver the market, allowing risky assets to recover. It is said that it may.

“The consensus is hawkish suspension, so it may be a pretty high bar for Powell to outsmart the market,” Brickell told CoinDesk. “From a communication standpoint, it’s hard to look hawkish when you’re paused, so my view is that it’s disappointingly interpreted as dovish. And rates (yields) go down, BTC will go higher, but I don’t think it will trigger a big move.”

According to CoinDesk data, bitcoin has not moved much at the time of writing, trading around $25,940.

｜Translation: coindesk JAPAN
｜Editing: Toshihiko Inoue
｜Image: QCP Capital
｜Original: Fed Preview: Bitcoin Market Skews Bearish as Analysts Anticipate ‘Hawkish Rate-Hike Pause’