Bitcoin after the FOMC dust settles: This date is crucial

Yesterday’s FOMC meeting of the US Federal Reserve (FED) brought less volatility to the Bitcoin market than many experts had expected. Bitcoin price moved in a narrow range during and after the meeting.

Ultimately, the Fed raised interest rates by 75 basis points, as expected. The FOMC statement said the Fed would “take into account cumulative tightening and backlog.”

As a result, markets reacted very dovish until 30 minutes later when Powell’s press conference began. First, the DXY retreated after the FOMC statement, and risk assets such as the S&P500 and Bitcoin saw a sharp rise in price. However, this was not to last.

During Powell’s speech, there was a big shift in sentiment that turned the market around. The DXY pumped over 112 points, leading to a price decline for risky assets.

DXY USD Bitcoin
DXY reversal due to Powell’s speech. Source: TradingView

The much-anticipated speech was, all in all, quite empty. The chairman of the US central bank struggled not to give any insight into the interest rate strategy for the coming months.

For every hawkish argument, he also made an opposing, dovish statement. Nevertheless, the market considered Powell’s statements rather hawkish.

Two key statements are likely to have rattled the market. On the one hand, Powell said that “the final level of interest rates will be higher than previously expected,” an extremely hawkish comment that ended the rally and sent stocks into a tailspin. Crypto and Bitcoin followed down, but not as strongly.

On the other hand, the FED leader was keen to emphasize that the institution must look at the data – and wait and see. Several times he emphasized that it would be “very premature” to think or talk about a pause in interest rate increases.

The “real” decision day for Bitcoin?

The latter statement from Powell can be interpreted as the inflation rates – Consumer Price Index (CPI) and Producer Price Index (PPI) – which will be published again on 10 November, will be a very decisive day for the financial markets.

If inflation comes in higher than expected, all markets are likely to dump. If, on the other hand, an upswing and significant fall in inflation is seen, it could trigger the start of a new upswing.

On 10 November, the spotlight can be turned on the core CPI (change in the costs of goods and services excluding the food and energy sectors) and PPI. In previous crises, such as the 1970s, 1980s and also 2008, the PPI was a leading trend indicator.

Core KPI
The core KPI rose in recent months. Source: TradingEconomics

PPI always fell earlier than core CPI and CPI because manufacturers pass on their new prices to customers with a time lag. Core CPI has continued to rise since July, prompting the Fed to worry that inflation may be entrenched.

At the same time, however, producer prices (PPI) fell. Thus, there may be a good chance that the core KPI will show a decline.

This in turn could lead financial markets to believe that Powell may hit the brakes in his next speech on December 14. As always, the market will try to lead the FED in front.

In this sense, November 10 could be a hugely pivotal day, even though the next FOMC meeting is more than a month away.

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