The Fed’s decision is looming after the US government moves Bitcoin – here’s what to expect

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The BOJ, Fed and BOE are making key decisions this week. International markets estimate the impact of these central bank policies.

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The US Federal Reserve is set to announce its decision on interest rates this Wednesday afternoon around 2PM EDT.

As things stand, the Fed is not expected to announce the rate of cuts now. Come September, however, the CME FedWatch tool predicts a 4.1% chance of easy rates in 30-day futures. This probability is composed of 12 to 13.8% basis points with a 50 basis point probability of being cut instead of the standard 25.

This news came with the Consumer Price Index (CPI) recorded in the US last June, which boosted the crypto market after showing modest inflation of 3.3 percent year-on-year. Bets on Polymarket for the July 2024 decision show “no change” with 96% odds.

However, if the Federal Open Market Committee (FOMC) ultimately decides to raise or cut rates, a positive outcome for crypto is still predicted. Leveling up means slow but steady progress. On the other hand, a rate cut would be silly given how low interest rates would lower the cost of borrowing, encourage more investment in riskier assets like crypto, and liquidity. Additionally, low rates tend to weaken fiat currencies, which can lead investors to seek alternative stores of value such as crypto.

At the time of writing, Bitcoin is changing hands at $65,600 and has continued to fluctuate over the past month, while stocks remain strong. But with the possibility of a decline in September, all directions point to a good outcome for crypto.

Different decisions: America, Japan and England

The Bank of Japan, Federal Reserve and Bank of England are set to announce interest rate decisions this week, with analysts expecting different results from each central bank.

The Bank of Japan (BOJ) will lead on Wednesday, analysts predict that it will raise rates from the current range of 0%-0.1% or come close. Japan's inflation remains above the Bank's 2% target, and the yen is hovering at a multi-decade low against the US dollar. According to the Wall Street Journal, the BOJ believes that tighter monetary policy will boost sluggish consumption by strengthening the yen and easing import prices.

The Federal Reserve is expected to hold rates at its meeting on Wednesday, but markets are waiting for a clear signal of rate cuts at its next meeting in September. CME FedWatch data shows a 100% chance of a September rate cut, with a 12% chance of a rate cut of 50 basis points instead of the usual 25 basis points.

The Bank of England (BOE) faces a closely watched decision on Thursday, with economists and markets split roughly 50/50 on whether it will cut rates for the first time in years. Although the BOE is easing, it could signal a cautious approach to future cuts.

These central bank decisions come amid a broader monetary tightening trend among major economies. The European Central Bank and the Bank of Canada have implemented rate cuts in recent months, marking a reversal from years of tightening cycles.

For the crypto market, especially Bitcoin, the impact of these decisions is likely to be limited in the short term, barring significant surprises. However, the long-term trend toward easier monetary policy could benefit risk assets like Bitcoin. This 56% year-to-date rally, while primarily related to demand for US-based spot ETFs, may also reflect market expectations of this easing cycle.

The government will move Bitcoin ahead of the FOMC decision

The Federal Reserve's upcoming interest rate decision comes days after a DOJ freezed $2B worth of Bitcoin in legal tender, signaling a flurry of attention across the financial and economic sectors. With the Fed expected to keep rates on hold and hint at future cuts, which could boost risk assets like Bitcoin, the DOJ's massive transfer of held crypto assets has introduced uncertainty into the market.

The timing of the DOJ's Bitcoin activity, ahead of the Fed's announcement, raises questions about potential coordination or coincidence. If the Fed's decision is in line with the market's expected dovish outlook, it could reduce any negative pressure on Bitcoin prices due to fears of a government selloff.

Conversely, while the Fed may surprise with a more dovish stance, it could compound market volatility from the DOJ's actions. This situation highlights how government actions in different domains – from monetary policy to law enforcement – have interconnected effects on the crypto market.

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