Cryptos, equities hold steady ahead of Fed decision

Cryptocurrencies and stocks inched slightly higher Wednesday ahead of the Federal Reserve’s interest rate decision release. 

Bitcoin moved back into the green Wednesday morning after this week’s earlier selloff, posting a 1.1% gain over the past 24 hours. Ether, which has also been faltering since Monday, was just barely up Wednesday but still managed to stay above $2,200. 

Equity markets were flat as traders waited to hear from the central bank. The SP 500 and Nasdaq Composite indexes each gained as much as 0.2% earlier in the trading session before paring gains and settling around their opening prices. 

If all goes according to plan Wednesday afternoon, markets should react favorably, analysts say. Traders are anticipating the Fed to keep interest rates where they are and extend its current forward guidance Wednesday. They also expect the central bank to update its expectations to place interest rates at 4.876% by the middle of 2024. If all goes according to plan, it should push prices higher, analysts say. 

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“As long as [Fed Chair Jerome] Powell isn’t too hawkish during the press conference, this outcome would likely spur a modest rally in stocks and could key a rally into year-end,” Tom Essaye, founder of Sevens Report Research, said. “To be clear, this outcome wouldn’t introduce anything new but it would remove the risk of a hawkish surprise and allow momentum to carry stocks higher into the end of the year.”

Other analysts say a positive end to 2023 — the SP 500 is slated to end the year more than 20% — could be just the beginning of a more sustained rally. 

“The SP 500 has an 80% win rate in situations similar to where we find ourselves now. The only exception was at the dawn of World War II,” Nicolas Colas, founder of DataTrek Research, said. “Naturally, if you believe another such conflagration will occur then equities are not the right place to be. Otherwise, the odds are good that markets have not just been ignoring reality this year. They have looked forward and like what they see. We remain bullish on US equities.”

Given bitcoin’s ( BTC ) anticipated increased volatility this week, investors should consider timing when executing traders, researchers from Amberdata wrote in a report Wednesday. 

Bitcoin’s peak trading hours occur most often during US market times and are lowest during Asian trading hours,” Amberdata analysts wrote. “Given the large differences in peak and trough hourly trading volumes, diligent BTC traders can find the highest liquidity during US market hours between 13:00 and 16:00 UTC,” or between 8 am and 11 am ET. 

US traders looking to take advantage of lower volumes should switch their focus on the late Indian market hours, generally around 10 pm to 1 am ET, the report added. 

Later this week, traders will be watching for weekly US jobless claims data on Thursday. The Bank of England is also scheduled to release its December meeting summary and minutes Thursday.

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