CRYPTO SECTOR TURNS VOLATILE FOLLOWING FED’S MULTI-CUT RATE OUTLOOK
Crypto market and Fed rate cuts: The crypto market remained cautious on February 17 as traders monitored key catalysts, including fresh remarks from the Federal Reserve and ongoing developments in the Middle East.
Crypto Market Reacts to Dovish Tone from Austan Goolsbee
Bitcoin slipped 0.83% but held steady around $67,000, while Ethereum gained 1.24% to trade near $1,980. The total cryptocurrency market capitalization edged down 0.15% over the past 24 hours to approximately $2.34 trillion.
Market sentiment indicators reflected caution. The Crypto Fear and Greed Index remained deep in the “extreme fear” zone at 13, while the Altcoin Season Index stood at 31, signaling continued Bitcoin dominance.
Volatility increased after Austan Goolsbee, president of the Chicago Fed, said several interest rate cuts could be possible this year if inflation continues to move toward the 2% target. He emphasized that policymakers need further confirmation that inflation is sustainably declining before implementing additional cuts.
His comments followed fresh data from the Bureau of Labor Statistics showing that consumer inflation eased to 2.4% in January from 2.7% previously, while core CPI held steady at 2.5%. Inflation has gradually declined from 3%, strengthening expectations that the downward trend could continue in the coming months.
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While the Fed’s latest dot plot suggests just one rate cut this year, traders on Polymarket are pricing in as many as three cuts. Historically, cryptocurrencies have benefited from looser monetary policy, as seen during the COVID-19 period when aggressive rate cuts fueled record highs in Bitcoin and altcoins.
Hedge Funds Turn Bearish on the U.S. Dollar
Goolsbee’s remarks coincided with reports that hedge funds are increasingly betting against the U.S. dollar. A Bank of America survey found that dollar positioning among fund managers has fallen to its lowest level in more than a decade.
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A weaker dollar often supports cryptocurrencies since most digital assets are priced in U.S. dollars, potentially increasing their relative appeal.
Fed Minutes in Focus
Looking ahead, the next major catalyst for Bitcoin and altcoins will be the release of minutes from the Fed’s latest monetary policy meeting.
The document is expected to provide deeper insights into policymakers’ outlook and potential timing of future rate decisions, which could significantly influence short-term crypto market direction.
Conclusion:
The crypto market remains on edge as investors weigh dovish signals from the Federal Reserve against persistent macroeconomic uncertainty. While cooling inflation has strengthened expectations of potential rate cuts, policymakers remain cautious about confirming a sustained return to the 2% target. Bitcoin and Ethereum continue to trade within tight ranges, reflecting investor hesitation ahead of the upcoming Fed meeting minutes. If interest rate cuts materialize and the U.S. dollar weakens further, cryptocurrencies could gain renewed bullish momentum in the months ahead.
