Fed Meeting May Impact Bitcoin Bull Run

• The United States Federal Reserve (Fed) is expected to meet with politicians to announce their plan to begin reducing the monthly $120 billion asset purchase program implemented as a result of the pandemic economic crisis. The regular bond purchases by the Fed have effectively caused interest rates to remain at extreme lows, acting as a lubricant to the economy to promote borrowing and spending of capital.

• Financial analysts have conflicting views on the situation, where some presume that the taper is “priced in.” Goldman Sachs has stated that they forecast the first rate hike to begin in July 2022, then again in November 2022, and two hikes in 2023 and 2024 respectively.

• Regardless, the language and context used during the meeting will have a greater effect on market prices more so than the actual taper itself. If the Fed statement suggests that inflation is not “transitory,” then it could be seen as policymakers becoming more unhappy with the raised levels of inflation and possibly implementing faster rate hikes. This could in turn increasing selling pressure to Bitcoin and equity markets as investors rotate their capital into other markets.

• Bitcoin is increasingly seen as a “risk on inflation hedge,” where the new store of value is seen to become more valuable when during times of lower interest rates and inflationary periods. In deflationary and higher interest rate environments, Bitcoin has not performed as well historically.