The cryptocurrency market may face more volatility during today’s trading session. The US Federal Reserve is scheduled to host the Federal Open Market Committee (FOMC) meeting and may announce a tough anti-inflation approach.
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Inflation measures were at a 40-year high against the US dollar. Thus, investors are expecting the financial institution to announce a tight monetary policy to try to bring down the inflation that has affected the market for cryptocurrencies and risky assets.
At the time of writing, Bitcoin is barely hanging above $20,000 and has recorded a loss of 33% in the past week. Ethereum posted a 40% loss over the same period with the smaller cryptocurrency trading in the red.
The trading desk QCP Capital recently published a market update highlighting the panic levels in the crypto market. As Bitcoin and other larger cryptocurrencies have turned to the downside, major crypto companies have failed to meet their financial commitments.
The latest settlements came on the heels of a catastrophic collapse in the Terra ecosystem that has already paved the way for a weak market to see more losses. Now, lending and borrowing platform Celsius has stopped all withdrawals, and Coinbase and BlockFi have fired 18% of their employees.
In a letter to his employees, Coinbase CEO Brian Armstrong spoke of an impending economic recession. These events contributed to the selloff in the cryptocurrency market. QCP Capital said:
These are record levels for this year, reflecting the growing panic in the market as we head to the FOMC in a few hours. Markets revised expectations for a rate hike from the Federal Open Market Committee (FOMC) from 50 basis points to 75 basis points. Markets are concerned that the Fed may prioritize inflation over recession fears.
In other words, the Fed could choose to stop inflation regardless of more bloodshed in the traditional market.
Will the cryptocurrency market witness more violence?
However, QCP Capital believes that there is potential for some relief in the short term. This move to the upside may be supported by a significant amount of leveraged positions that were liquidated during the recent downward movement.
Additionally, Bitcoin is trading above its previous all-time high which often served as a major area of support. This may give the bulls more room to breathe as selling pressure drops. QCP Capital added:
The market appears to be in an extreme downtrend at the moment and any dovish signal from the Federal Reserve could lead to a short squeeze. While everyone is focusing on the negative headlines, the bullish move can take the market by surprise.
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The Fed meeting will take place in less than an hour and could push Bitcoin and the crypto market into the pre-2020 range. This could see the price of BTC trade in the $10,000 levels, but so far, $20,000 is stable.