As the financial world eagerly awaits the Federal Reserve’s FOMC rate decision, both traditional markets and the cryptocurrency sector find themselves in a state of anticipation. Set to address the public after the announcement, Federal Reserve Chair Jerome Powell aims to shed light on this crucial decision.

Reviewing the Macro Economic Landscape:
Recent months have witnessed a rekindling of inflation, with July experiencing a year-over-year increase of +3.2%, followed by an even higher inflation rate of 3.7% YoY in August. This surge was accentuated by August’s significant month-over-month inflation growth of +0.6%, marking the highest level for the year.

In contrast, signs of a labor market slowdown have emerged, as reflected by a leap in unemployment figures from 3.5% in July to 3.8% in August. Various Fed officials anticipate this trend of gentle deceleration to persist, further aligning with the observed sentiment in the market.

Despite concerns surrounding inflation, the Federal Reserve officials have expressed confidence in the current monetary policies, allowing them ample room to gauge future developments. Consequently, market participants are predicting no adjustments in interest rates during this FOMC cycle.

The Focus on the Fed’s “Dot Plot”:
Beyond the rate decision and Powell’s eagerly awaited speech, the release of the Fed’s new “dot plot” at 2:00 pm becomes the central event of the day. This visual representation of interest rate projections and economic growth could potentially have the most significant impact on the markets during this event. The crucial question arises: What does the data indicate about the overall economic health of the United States, and when can we expect the first interest rate cut?

Historical data from the June session showed that the median prediction among Fed officials pointed towards a year-end funds rate of 5.6%. This suggests the possibility of a rate hike later this year.

Bitcoin’s Stance Amidst Economic Speculations:
With the FOMC rate decision looming, Bitcoin finds itself in a volatile environment. Keith Alan, co-founder of Material Indicators, highlights the fluctuating signals on Bitcoin’s daily and weekly charts, suggesting the influence of large traders or “Killer Whales.” Alan notes that Monday’s rally may have been driven more by market manipulation than a broader sentiment shift.

Looking at the potential repercussions of the rate decision, Furkan Yildirim points out a fascinating trend: hedge funds are now net long on the US dollar for the first time since March. Despite the possibility of the rate decision being a non-event for Bitcoin and cryptocurrencies, Yildirim emphasizes an enduring hawkish undertone that may persist in the market.

Considering the currency dynamics at play, Yildirim highlights the recent rise of the US dollar and the associated repositioning of hedge funds, primarily influenced by the ECB’s decision and the weakened euro. Interestingly, on smaller time frames, Bitcoin has not shown an inverse correlation with the rise of the US dollar. If the dollar index (DXY) continues its upward trend, Bitcoin could potentially continue to rise due to its intrinsic market dynamics.

Disclaimer: The information provided in this research report is for informational purposes only and should not be interpreted as financial or investment advice. The NFT and cryptocurrency market is highly volatile, and readers should conduct thorough research before making any investment decisions.