25 April, 2024

Grayscale Reflects On The Potential Impact Of FOMC Meeting

20 Sep, 2023

28 Nov, 2023

  • Grayscale believes that the upcoming FOMC meeting will likely drive crypto assets over the short term. 
  • The Federal Reserve is expected to decrease its securities portfolio which may drive up interest rates. 
  • Bitcoin’s price has historically increased during the Federal Reserve’s easing process and vice versa. 

Grayscale Investments, the crypto giant behind the world’s largest Bitcoin fund (Grayscale Bitcoin Trust), recently stated that the upcoming Federal Open Market Committee (FOMC) meeting would have a considerable impact on the crypto market. Crypto prices would be impacted more by the tightening circle, rather than the Federal rate hike. 

Grayscale took to X (formerly Twitter) earlier today to reflect on the potential impact of the FOMC meeting:

According to Grayscale, the Federal Reserve’s policy pivots in the context of interest rates have historically had major implications for digital asset valuations and the broader crypto market. This was witnessed back in 2020 when the Fed stagnated interest rates, which led to a significant surge in Bitcoin’s price. 

However, when the Federal Reserve announced rate hikes in mid-2021 to wind down its extensive securities portfolio, BTC’s price tanked amid rising real interest rates due to Fed rate hikes. The Fed’s policy decisions were largely based on efforts to control the rate of inflation, which fluctuated due to the interest rates. 

As per Grayscale, Bitcoin is an alternative non-sovereign money system, as well as a digital rival to gold. BTC also served as a key element in the public blockchain ecosystem with other use cases, which meant that it could also behave like a risky asset when compared to traditional commodities. 

Speaking on the potential impact of a Federal rate change, Grayscale stated:

A possible end to the Fed’s policy rate increases should be considered an important moment for Bitcoin and other digital assets. Over the last few years, valuations have been heavily influenced by the macro backdrop and swings in Fed policy.

Grayscale added that the policy guidance following the upcoming FOMC meeting would likely drive crypto and traditional assets over the short term. The Federal Reserve would likely continue to wind down its securities portfolio, putting upward pressure on real interest rates. 



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