The Fed meeting this week approaches the markets in a rare atmosphere of uncertainty: traders are debating whether the Federal Reserve will decide to raise rates, while Bitcoin appears more resilient than shares of technology companies linked to artificial intelligence.
The largest cryptocurrency is holding above the $63,000 mark and is trading almost unchanged just below $64,000 on Tuesday, having recovered from an intraday dip. On the other end of the market, chipmakers and companies associated with the AI boom are once again feeling pressure on their stocks.
The Market Is Uncertain About The Fed Decision
Before the decision, expectations are as follows:
- Rate unchanged: about 70 percent.
- Increase by 25 basis points: about 30 percent.
The focus will be not only on the decision itself but also on the rate trajectory through the end of the year: the market is looking for signals on whether policy will remain tight or if the Fed will start preparing a softer course. Such a fork is unusually wide on the eve of a decision by the United States central bank.
The Fed is the central bank of the US. Through the federal funds rate, it influences the cost of money: the higher the rate, the more expensive borrowed capital becomes and the more cautiously investors treat risky assets; a looser policy, on the contrary, usually supports demand for risk.
One reason for the nervousness is less reliance on advance signals from Kevin Warsh, who heads the Fed and plays a key role in the FOMC. It is harder for investors to understand in advance how the Federal Open Market Committee will assess inflation, risks to the economy, and the future trajectory of the federal funds rate.
“Tomorrow’s committee meeting, the second for Kevin Warsh as Fed chair, has become one of the most uncertain in recent years,” analyst Tahhib Rahman noted.
According to him, if you compare all Fed decisions since 2015, only twice have market participants been even more divided in their expectations. For Wall Street, this is an important moment.
The Fed’s monetary policy directly affects investments, the US dollar, the securities market, and the overall financial market.
Bitcoin Is Moving Less With Stocks
Despite the tension ahead of the Fed decision, Bitcoin mostly held its ground in July and gained about 6 percent for the month. At the same time, the broad stock index barely changed, while the basket of semiconductor stocks fell by almost 20 percent.
This divergence has fueled talk that Bitcoin is at least partially decoupling from traditional risk assets. Whereas previously the cryptocurrency often moved in tandem with the tech sector, now the reaction has become less synchronized, especially amid overheated expectations around artificial intelligence.
“The tech index entered July with strong momentum and increasingly stretched positioning, while Bitcoin continued to consolidate near multi-year lows. Against this backdrop, correlations should weaken,” wrote Vetle Lunde.
In his opinion, the Fed meeting may affect Bitcoin less than in previous periods of acute uncertainty around regulator policy. For the market, this is an important signal: pressure on one AI stock after another does not necessarily have to automatically drag down crypto assets.
What Will Matter For Investors
Market participants’ expectations have shifted in recent weeks under the influence of several factors:
- Inflation data.
- Labor market conditions.
- Economic growth rates.
- Geopolitical tensions.
- Rising oil prices.
- Tariff risks.
Such signals are watched not only in the US: investors in Russia also assess them through the US dollar exchange rate, the cost of capital, and decisions by the Bank of Russia.
For retail and professional market participants, data on rates and stocks remain key benchmarks. Market summaries, including the Investing dot com service, help track such changes, but the final reaction still depends on the Fed’s wording. Even shares of major tech issuers like Microsoft are sensitive to how the market reads the future cost of money.
“Any even moderately dovish signal from Warsh could extend the period in which Bitcoin appears stronger than other assets,” says Tahhib Rahman.
The main question now is whether Kevin Warsh will give markets a reason to expect a softer course or, on the contrary, emphasize the Fed’s readiness to act more strictly. In the first case, Bitcoin may retain its advantage over overheated segments of the securities market.
