What’s next for the Fed? ──Continuing interest rate hikes or the opposite scenario | coindesk JAPAN | Coindesk Japan

The US Federal Reserve (Fed) is grappling with two difficult scenarios.

1. Continuation of Rate Hikes:Inflation is still too high (albeit falling), a tight labor market is likely to push prices higher, and inflation is affecting everyone. Nothing has changed.
2. reverse scenario: Inflation is still high, but the pace of rising interest rates is depressing the value of bonds. As a result, the financial stability of many banks is undermined, and the financial stability of depositors is undermined. Things have all changed.

The cryptocurrency market favors the second option. Bitcoin (BTC) is up 5% and Ethereum (ETH) is up 4% after February’s US Consumer Price Index (CPI) released on the 14th.

Markets worry that the Fed’s hawkish stance poses a greater and more direct threat to the economy than inflation. The recent banking crisis reinforced that claim.

On the other hand, there were some notable points in the US CPI. The US CPI in February increased by 0.4% from the previous month. It’s headed in the right direction, slowing from a 0.5% gain in January.

But core CPI, which excludes volatile food and energy, rose 0.5% from January’s 0.4% rise. American consumers are paying more than they used to for everything except used cars and the gradual decline in gasoline. The nasty inflation scenario continues.

But Tuesday’s price action showed that inflation fears would take a back seat to economic growth concerns.

Bitcoin jumped 4% in the first hour after the CPI announcement, breaking the $26,000 mark for the first time since June 2022. It crossed the 20-day moving average line for the second consecutive day and broke the upper limit of the Bollinger Bands for the first time in 57 days.

TradingView

Ethereum is showing a similar move, although it has not been confirmed to break the upper limit. Trading volume also increased. Polkadot (DOT), Litecoin (LTC), and Ethereum Classic (ETC) also saw volume increases.

In the macro scenario, the 0.25% rate hike probability fluctuates from 0% to 35% to 16.6% in just one week.

The next few weeks will see volatility, especially in risk assets and crypto assets.

｜Translation: coindesk JAPAN
｜Editing: Takayuki Masuda
｜Image: TradingView
｜Original: Crypto Investors Are Left Guessing the Fed’s Next Move