Bitcoin (BTC) traders are taking a defensive stance ahead of Wednesday’s U.S. Federal Reserve meeting, with the central bank seen likely to leave interest rates unchanged while keeping the door open for future increases in a move some observers described as a hawkish pause. According to Singapore-based crypto trading giant QCP Capital, puts – or bearish bets – tied to bitcoin are trading pricier than bullish calls heading into the Fed meeting. For the FOMC meeting, we think the risk is that they do a ‘hawkish skip’ – implying they pause at this meeting, but raise their median dot [interest rate] projection to show a continued hiking bias to appease the committee hawks, QCP Capital’s market insights team said in an update published Tuesday.
The U.S. headline consumer price index (CPI) slipped to a two-year low of 4% in May, falling below the current Fed funds rate. That has created room for the Fed to hold rates steady at Wednesday’s meeting, according to QCP. However, both headline CPI and the Fed’s preferred inflation measure, the core PCE at 4.7%, remain well above the central bank’s long-held target of 2%, leaving the Fed less room to end the tightening cycle.
David Brickell, director of institutional sales at crypto liquidity network Paradigm, said the consensus for a hawkish skip means Powell may struggle to out-hawk the market, allowing a recovery in risk assets. The consensus is for the hawkish skip, so the bar might be quite high for Jerome Powell to out-hawk the market, Brickell told journalists. From a communication perspective, I think it’s difficult to sound too hawkish when you’re taking a pause, so my bias would be that it’s interpreted as more dovish relative to expectations.
At press time, Bitcoin traded little changed near $25,940, CoinDesk data show.