The cryptocurrency market remained relatively stable to slightly lower on Tuesday, with dogecoin (DOGE) and XRP experiencing the most significant declines among major cryptocurrencies, each down over 3% in the last 24 hours. The CoinDesk 20 Index (CD20), which reflects the overall crypto market, declined by 2%.
This period of low volatility is occurring as bitcoin (BTC) traders prepare for the upcoming Federal Open Market Committee (FOMC) meeting slated for Wednesday. This meeting is expected to shape monetary policy and impact riskier assets, including digital currencies.
Market participants anticipate that the Federal Reserve will keep interest rates steady at 4.25%–4.50%. The comments from Chair Jerome Powell could greatly influence investor mood. A hawkish approach, which might indicate a stricter policy or a delayed timeline for rate reductions, could exert downward pressure on bitcoin and lead to more significant decreases in altcoins. On the other hand, a dovish outlook that suggests possible future easing could trigger a rally.
“A rate cut this Wednesday seems quite improbable as the U.S. moves away from a fiscal dominance model—where government expenditure spurred growth—to a focus on deficit reduction supported by [former President Donald] Trump,” analysts from QCP Capital pointed out in their message on Tuesday. “This transition shifts the responsibility back to monetary policy. While we do not foresee an unexpected cut, any dovish hint from Powell could act as a catalyst for upward momentum.”
“Funds might be shifting away from momentum trades linked to Trump, such as NASDAQ and Bitcoin, and into long-ignored markets in Europe and China. Traditionally, crypto values have trailed changes in global liquidity conditions,” they added.
Agne Linge from WeFi observed that overall market volatility remains high, with the crypto fear and greed index sitting at 22, signaling “extreme fear.” Investors are contending with uncertainties surrounding inflation, trade disputes, and global tensions.
“In the U.S., the S&P 500 and Nasdaq Composite faced their fourth consecutive weekly declines last week, and the Dow Jones fell by 3.1%, marking its steepest weekly drop in nearly two years. The prior week’s unusual downturn comes amid ongoing uncertainties for the remainder of the month,” Linge remarked, noting that macroeconomic challenges could ultimately exert downward pressure on bitcoin prices.
Ryan Lee, the chief analyst at Bitget Research, highlighted that bitcoin is currently trading within a narrow range, with a movement toward either $75,000 or $90,000 equally plausible, depending on traders’ reactions to the U.S. interest rate announcement.
“Bitcoin’s recent pullback has traders monitoring critical support levels between $82,000 and $85,000. This consolidation phase following a rally is typical and healthy but also tests whether the recent momentum is sustainable,” Lee mentioned in an email. “Any unexpected developments from the FOMC could disrupt the current market dynamics.”
“If the market sentiment turns negative, bitcoin may drop toward the $75,000–$80,000 range, whereas a favorable macroeconomic environment could propel prices back to $90,000,” he concluded.