The crypto market could face more volatility during the trading session today. The US Federal Reserve is set to host its Federal Open Market Committee (FOMC) meeting and possibly announce a hard-line approach to fighting inflation.
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Inflation metrics have been at a 40-year high against the US dollar. Therefore, investors expect the financial institution to announce an aggressive monetary policy to try to reduce the inflation that has been affecting the cryptocurrency market and risk assets.
At the time of writing, Bitcoin is barely above $20,000 and is posting a 33% loss in the past week. Ethereum posts a 40% loss over the same period with smaller cryptocurrencies trading in the red.
Trading desk QCP Capital recently published a market update highlighting the levels of panic in the crypto market. As Bitcoin and other larger cryptocurrencies trended lower, major cryptocurrency companies defaulted on their financial obligations.
Recent events followed a catastrophic collapse in the Terra ecosystem which already set the stage for a weak market to see further losses. Now, lending and lending platform Celsius has stopped all withdrawals, and Coinbase and BlockFi have laid off 18% of their staff.
In a letter to his employees, Coinbase CEO Brian Armstrong spoke of an impending economic downturn. These events contributed to the crypto market sell-off. QCP Capital said:
These are record levels for the year, reflecting the heightened panic in the market as we approach the FOMC in a few hours. Markets have revised expectations for the FOMC rate hike from 50 bps to 75 bps. Markets are rightly concerned that the Fed may be prioritizing inflation over recession concerns.
In other words, the Fed could choose to stop inflation regardless of spilling more blood in the traditional market.
Will the crypto market see more violence?
However, QCP Capital believes that there is a chance for some short-term relief. This move higher could be supported by the large number of leveraged positions that saw liquidations during the recent move lower.
Additionally, Bitcoin is trading above its previous all-time high, which has often served as an important area of support. This could provide the bulls with more breathing room as the selling pressure eases. QCP Capital added:
The market seems to be in its maximum downtrend at the moment and any dovish indication from the Fed could trigger a short contraction. While everyone is focused on the negative headlines, a strong move higher could take the market by surprise.
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The FED meeting is taking place in less than an hour and could send Bitcoin and the crypto market back to their pre-2020 range. This could see BTC price trading in the $10,000 levels, but right now, $20,000 is kept.