As markets await the Federal Open Market Committee’s (FOMC) decision on January 29, crypto investors find themselves at a critical juncture. Following the primary ever crypto executive order by US President Donald Trump and yesterday’s DeepSeek price crash, macroeconomics are once in the main focus.

Crypto Market FOMC Preview

Crypto analyst Byzantine General (@ByzGeneral) has identified a consolidation range between $90,682 and $108,388 for Bitcoin. He anticipates limited movement prior to the FOMC meeting, citing three potential scenarios for the way the market might respond once the Fed concludes its discussions: “Like I said in my thread yesterday, we’re really just consolidating between this range ($90,682 – $108,388). And I expect nothing material to occur until Wednesday FOMC. After which there are 3 possibilities with only 2 outcomes…FOMC surprise dovish -> break out of range, FOMC neutral -> chop in range for longer, FOMC hawkish -> chop in range for longer”

Crypto market participants often interpret a dovish stance—one which signals or enacts rate of interest cuts or an prolonged pause—as supportive of risk-on assets, including Bitcoin and crypto. A surprise dovish tilt might be the catalyst for breaking the present trading range, based on Byzantine General. A neutral or hawkish outlook, alternatively, might mean an prolonged period of sideway price movement.

Of their assessment, banking giant ING laid out the broader macroeconomic context that might influence the Fed’s decision and projections for 2025. In keeping with ING: “Federal Reserve set for an prolonged pause. After 100bp of rate cuts the Fed has signalled it needs evidence of economic weakness and more subdued inflation prints to justify further policy loosening. President Trump’s low tax, light-touch regulation policies ought to be excellent news for growth, while immigration controls and trade tariffs provide upside risk for prices, suggesting we could have a protracted wait for the subsequent cut.”

The December FOMC saw a 25bp rate cut, but the next commentary suggested a slower and more gradual path of easing for 2025, potentially totaling just 50bp for the yr. ING points out that strong economic performance and protracted inflation pressures provide less incentive for the Fed to lower rates quickly. The bank also highlights a lingering possibility that the Fed may even adopt a more hawkish tone than it has publicly acknowledged up to now:

“In actual fact, the chance is that the Fed is definitely more hawkish than they indicated… Nonetheless, with President Trump having just won re-election and his policy plans differing so starkly from President Joe Biden’s, Fed Chair Jay Powell acknowledged that some felt the necessity to incorporate the potential policy shifts into their December 2024 projections ahead of time. Nonetheless, not all did and since his inauguration, there was little sign of any moderation in Trump’s key policy thrust.”

ING’s economists further note that market participants largely expect no policy change on January 29, while the bank itself previously anticipated a March rate cut—an event it now sees as increasingly unlikely: “Which means no change to monetary policy is a certainty on 29 January and it makes our previous call of a March rate cut look unlikely – currently just 6bp of a 25bp move is discounted by financial markets.”

Nonetheless, ING still forecasts three rate cuts for 2025, hinging on a gradual cooling of the labor market and moderating wage pressures. They emphasize that rising Treasury yields, higher borrowing costs, and a stronger dollar could mix to tighten financial conditions, ultimately forcing the Fed’s hand later within the yr: “Due to this fact we take the view that the Fed might have to push harder and cut rates a bit further than currently priced by markets, but that’s more prone to be a second half of 2025 development.”

On the balance sheet reduction (quantitative tightening, or QT), ING sees the Fed possibly ending QT in 2025 if excess liquidity shrinks to levels below what the central bank deems comfortable. The bank pegs $3 trillion in reserves as a critical threshold: “We’re currently at US$3.5tn. So we’re comfortable. At the identical time, the reverse repo balance is running at US$125bn, and if that were to hit zero, then we’d hit a point of tightness. That’s close, as QT is running at US$60bn monthly. QT could have to finish by mid-2025 based on an easy extrapolation of this.”

Regarding currency markets, ING suggests that the dollar could retain its strength if the Fed stays cautious about easing: “December’s FOMC meeting actually added support to the dollar bull run… it is tough to see the January FOMC event risk being read more dovishly… We doubt the Fed is able to thrust back against those market expectations. This could keep dollar rate spreads relatively wide and argues that the FOMC is not going to be the rationale the dollar corrects lower.”

With President Donald Trump starting his second term, questions on the Fed’s independence have resurfaced. Historically, Chair Jerome Powell has deflected suggestions of political influence: On the upcoming FOMC meeting, Powell may be expected to dodge questions on the Fed’s independence and the potential impact by Trump.

The President, nevertheless, has been explicit about his views on rates of interest. When asked if he expected the Fed to hearken to his demands for rate cuts, Trump responded: “I might make a powerful statement.” After being asked if he expects the Fed to listen, he answered “Yeah.”

At press time, the full crypto market cap stood at $3.45 trillion.

Featured image from Shutterstock, chart from TradingView.com