Federal Reserve's Rate Review Anticipated to Influence Crypto Market Volatility

According to CoinDesk, the Federal Open Market Committee (FOMC), the monetary policy-making body of the U.S. Federal Reserve, is set to release its rate review today. This announcement will include growth and inflation projections, as well as an interest rate forecast. The event is expected to cause volatility in the cryptocurrency market, potentially leading to price fluctuations of 3% to 5% in major cryptocurrencies such as bitcoin (BTC), ether (ETH), and solana (SOL). This prediction is based on Volmex's one-day implied volatility indices for BTC, ETH, and SOL. At 12:30 UTC, the bitcoin one-day implied volatility index (BVIV) indicated an annualized volatility rate of 63.32%, suggesting a 24-hour price movement of approximately 3.31%. This daily movement is calculated by dividing the annualized volatility by the square root of 365, representing the total number of trading days in a year. Similarly, the volatility indices for ether and solana indicated expected 24-hour price swings of 5.25% and 5.73%, respectively. While these figures may seem alarming to equity or currency traders, they are not considered unusual within the crypto market. Therefore, despite the significance of the Federal Reserve's announcement, it is not expected to cause an immediate surge in volatility. The central bank is anticipated to maintain the current benchmark borrowing rate while possibly signaling the conclusion of its extended quantitative tightening program. However, any potential gains in risk assets might be moderated by a possible stagflationary adjustment in the summary of economic projections. This development could influence market sentiment and investor behavior, as stakeholders assess the implications of the Federal Reserve's policy decisions on the broader economic landscape.