Three central banks, seventy-two hours. The opening week stacks up with the decision of the American Federal Reserve on Wednesday. Then follow that of the Bank of England on Thursday, then that of the Bank of Japan on Friday. Operators already assign a probability greater than 90% to a US rate cut.
This near certainty has an unpleasant consequence for the crypto markets: the decline is already in the price. Thus, Bitcoin will not benefit from any surprise effect. The fuel lies elsewhere, in the committee's quarterly projections and in Jerome Powell's tone.
Key Points
A 25 basis point cut from the Fed is expected by more than 90%. It is therefore already integrated into the price of Bitcoin
The dot plot and Jerome Powell's press conference will weigh more than the decision itself
The Bank of England should hold its rate at 4% and slowly reduce its bond portfolio
The Bank of Japan remains the real risk. In August 2024, its unwinding of the carry trade had already caused Bitcoin to fall by 20%
The Fed gets the ball rolling, and crypto has already bought the rumor
The FOMC, the Fed's monetary policy committee, meets Tuesday and Wednesday. The announcement will come late Wednesday afternoon in Washington, or 8 p.m. in Paris. The consensus is for a cut of 25 basis points. It would thus bring the Fed funds target range between 4% and 4.25%. This would be the first relaxation since December.
The job market has done the persuasion work. In August, only 22,000 jobs were created and unemployment rose to 4.3%. Furthermore, a statistical revision erased 911,000 jobs over twelve months. However, inflation remains stuck at 2.9% over one year, above the 2% target. Powell will therefore have to defend monetary easing in an economy where prices are not yet cooperating.
Two elements will weigh more heavily than the decision itself. The first is the dot plot. This anonymous chart summarizes where each committee member places their rate cursor for the coming quarters. It will indicate whether the market should anticipate just one additional decline between now and December, or two. The second is the press conference. The president of the Fed will arbitrate between the vocabulary of prudence and that of an assumed easing cycle.
The composition of the committee changes at the same time. The Senate must decide at the start of the week on the arrival of Stephen Miran to the board of governors. Chairman of Donald Trump's council of economic advisers, he could take his seat as early as Wednesday. Governor Lisa Cook, whom the White House is trying to dismiss, is still participating in the vote. A court decision was in fact favorable to him.
Bank of England and Bank of Japan, the two blind spots of the crypto market
The Bank of England publishes its decision on Thursday at midday London time. There is little doubt about the status quo at 4%. British inflation is in fact around 3.8%, the highest level in the G7. The other part of the press release mainly concerns long rates. This is the pace of quantitative tightening: the reduction of the government bond portfolio. This portfolio was accumulated during the years of massive redemptions. A slowdown in gilt sales would relieve a bond market that has been under pressure since the summer.
The Bank of Japan closes the sequence on Friday. Its key rate should remain at 0.5%. But the archipelago has been going through a zone of political uncertainty since the announcement of Shigeru Ishiba's departure. An internal ballot must also designate his successor at the beginning of October. The yen remains weak against the dollar. Furthermore, the hypothesis of an increase before the end of the year does not leave the table.
This parameter deserves the attention of cryptocurrency holders. On August 5, 2024, a Japanese turn of the screw triggered the sudden unwinding of the carry trade. Because these positions were financed in cheap yen to buy more profitable assets elsewhere. Bitcoin had lost almost 20% in two sessions and fell back below $50,000. A BoJ that explicitly prepares the ground for an October hike would put this mechanism back at the center of the game.
Bitcoin: global liquidity rather than 25 basis points
Bitcoin enters the week above $110,000, within reach of its records. Furthermore, US cash ETFs returned to positive net inflows. The transmission channel is known. When the cost of money falls, bond yields follow. Part of the capital is then redeployed towards supply-constrained assets. The 21 million units of the protocol will not move, whatever the decision on Wednesday evening.
Reverse risk has a name that traders know by heart: sell the news. A drop strictly in line with expectations, accompanied by cautious projections for the future, would be enough to trigger profit-taking. The market has indeed already received the good news. Most of the volatility will occur in the twenty minutes following the publication of the dot plot. Then, everything will be replayed during the press conference.
