On Wednesday (September 16), traders around the world are anxiously waiting for the Federal Reserve’s two-day Federal Open Market Committee (FOMC) meeting to end (later today) so they can hear what the Fed has to say in its statement and at its press conference.
What is the FOMC?
The Federal Reserve (which is the central bank of the U.S.) has three tools for determining monetary policy:
- “open market operations”, which the FOMC is responsible for.
- “the discount rate” and “reserve requirements”, which the Board of Governors of the Fed is responsible for.
Via these three tools, the Fed “influences the demand for, and supply of, balances that depository institutions hold at Federal Reserve Banks and in this way alters the federal funds rate.” The federal funds rate is “the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.”
The federal funds rate is very important because changes in this “trigger a chain of events that affect other short-term interest rates, foreign exchange rates, long-term interest rates, the amount of money and credit, and, ultimately, a range of economic variables, including employment, output, and prices of goods and services.”
The FOMC has 12 members: “the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis.”
The FOMC has eight “regularly scheduled” two-day meetings throughout the year. This month’s meeting started yesterday and finishes today. For the remainder of 2020, the remaining two meetings are held November 4–5 and December 15–16. At these meetings, the FOMC “reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth.”
Financial Markets Waiting to Hear From the Fed
Naturally, all financial markets (including crypto markets) are in limbo, anxiously waiting for this month’s FOMC meeting to end later today, probably sometime between noon and 2:00 p.m. Eastern Time.
At 2:30 p.m. Eastern Time, Fed Chair Jerome Powell will be hosting a live FOMC press conference:
How the Crypto Markets Are Doing
To give you a rough idea of how cryptoassets are performing today, 11 of the top 20 cryptoassets (by market cap) are currently in the green (i.e. up against USD).
Of the altcoins that are down today, the ones suffering the biggest losses vs USD seem to be decentralized finance (DeFi ) tokens. Here are a few examples:
- YearnFinance (YFI): $35.393.52 (-5.22%)
- Aave (LEND): $0.620 (-5.46%)
- Synthetix (SNX): $4.42 (-12.84%)
- Loopring (LRC): $0.237 (-13.96%)
As for Bitcoin, although around 12:30 UTC on Tuesday (September 15), the BTC price got as high as $10,936, currently (as of 08:27 UTC), it is trading around $10,881, up 2.17% in the past 24-hour period:
Simon Dedic, co-founder of crypto-focused research firm Blockfyre, had this to say about Bitcoin’s latest price action:
Also, earlier today, pseudo-anonymous analyst and trader PlanB made the very interesting observation that if more companies follow MicroStrategy Inc.’s example of buying Bitcoin for use as their primary treasury reserve asset, it will become increasingly difficult for governments to ban the use of Bitcoin:
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.
