Hawkish sentiment is spreading... Expectations for a March rate cut rise to 23%.
The nomination of the next chairman of the Federal Reserve is shaking the markets. More than 23% of investors predict that the Federal Open Market Committee (FOMC) will cut the benchmark interest rate at its March meeting, and uncertainty surrounding interest rate policy is increasing.
According to data from the Chicago Mercantile Exchange (CME), as of early February, 23% of traders predicted a 0.25 percentage point rate cut at the March FOMC meeting. This represents an increase of approximately 5 percentage points from 18.4% two days earlier on Friday. Although most still expect rates to remain unchanged, the expectation of a rate cut is slowly spreading.
At the heart of this shift lies President Trump's nominee for the next Federal Reserve chairman, Kevin Warsh. Nominated to address the situation following Jerome Powell's term ending in May, he is categorized as a "hawkish" figure favoring fiscal tightening.
The market is sensitive to the possibility of "strengthened tightening".
Cryptocurrency analyst Nic Puckrin pointed to Warsh's nomination as a major cause of market unease. He stated, "Kevin Warsh's nomination is having a huge impact on the market," and "behind the decline in safe-haven assets like gold from late January to early February, there were concerns about Warsh's comments."
Warsh has repeatedly mentioned that the Federal Reserve's balance sheet, which has expanded excessively due to asset purchases, is too large, and has hinted at a possible reduction in its size. The market interpreted this as a signal of "liquidity tightening" and judged that this could have a negative impact on overall asset prices, thus reacting cautiously.
Kraken's global economist, Thomas Perfumo, also commented that Warsh's nomination sends a mixed signal to the cryptocurrency market. He explained, "Investors had expected further easing, but Warsh's nomination actually suggests that liquidity and credit may stabilize or contract."
Interest rate policy has a direct impact on the cryptocurrency market.
Benchmark interest rates are also closely correlated with cryptocurrency prices. Typically, interest rate cuts stimulate the prices of risky assets like cryptocurrencies by increasing liquidity, while interest rate hikes tend to suppress asset prices. Therefore, the future direction of the Federal Reserve's monetary policy may become a decisive variable for the major cryptocurrency markets such as Bitcoin (BTC), Ethereum (ETH), and Solana (SOL).
In the market, concerns that the possibility of a rate cut after March may disappear due to a potential change in the leadership of the Federal Reserve are intertwined with expectations that the Fed may take flexible measures based on economic data or price trends.
While no one currently believes there will be an immediate and significant rate cut of more than 0.5 percentage points, the possibility of a small rate cut at the March meeting is gradually becoming a reality. This trend is expected to be influenced by economic indicators released in the coming weeks and whether the Trump administration's policies are finalized.
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Changes in the Federal Reserve's interest rate policy have a direct impact on the cryptocurrency market. Understanding the context of all these changes, such as the nomination of hawkish candidates for the next chairman and the rebound in expectations of rate cuts, and developing survival strategies is crucial.
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TP AI Precautions
This article uses a language model based on TokenPost.ai for article summarization. The main content may be omitted or may differ from the facts.
