Market analysts agree that BTC has excellent conditions before the end of the year to continue the upward trend in its price, but only if there is no significant turbulence in other markets. Simply put, if the market is doing well and the prices of riskier assets are rising, BTC should not be an exception.
For the above reasons, investors’ eyes will focus again this week on the Fed, the US central bank, which should give its fresh comment on the current situation of the US economy on Wednesday after a two-day meeting.
Will the Fed announce a slowdown in QE?
In recent months, the Fed’s briefings have been associated with expectations of an announcement of a slowdown in quantitative easing (QE), popularly speaking, “money printing,” or an indication of when the Fed could begin raising interest rates. These are two instruments through which the Fed can slow down dangerously rising inflation, which is a matter of growing concern, but its misuse could also negatively affect the stock market situation. This Wednesday, the Fed is indeed expected to take the first big step away from the emergency easing policies it launched in early 2020 following the outbreak of a coronavirus pandemic in the form of $ 120 billion a month in government bond and mortgage purchases. In other words, it announces a slowdown in “tapering”.
“I think the Fed has decided to start tapering quite early. We expect them to announce it next week and then they will start soon. ” Kathy Jones, chief strategist at Charles Schwab, told Yahoo Finance last week.
Will it raise interest rates as early as 2022?
“The big debate is now about how fast the Fed will move in relation to the real rate hike. Market expectations have indeed shifted towards 2022 and 2023. That would be a pretty aggressive rate of increase, ” she added.
In other words, Jones expects that the increase in interest rates could come sooner than expected a few months ago, when the years 2023 to 2024 were mentioned.
What will be the market reaction?
The question is how the market itself will react to the Fed’s announcement on Wednesday. The pace of inflation is too fast, which is why the US Federal Reserve is well aware that it must do something about this problem. Analysts and traders are becoming more interested in how the Fed will deal with inflation than when it slows down QE. While the Fed and the US Treasury have only recently talked about inflation as a temporary problem, their rhetoric has changed recently.
What about BTC?
BTC finds itself in a complicated situation in the face of the burning issue of inflation and the influence of central bank actions on its price. Its short-term price is largely influenced by risky investors, who, if they expect turbulence in riskier types of investments, will not hesitate to sell it, which can cause a sharp decline. On the other hand, BTC has more and more investors (real adopters), who see in it a long-term hedge against the bad actions of central banks due to the fact that it has clearly defined inflation, which is unchanged because it is decentralized.
What is certain is that the Fed wants to keep stock markets afloat. So he will probably only choose a slow pace of tightening the taps, and he will most likely not be able to answer when he will raise interest rates.