Futures markets, however, are clearer. They price in a 97% chance that the Fed will pause rate hikes, following three consecutive cuts. This expectation reflects a market gradually adjusting to the central bank’s recent policy moves.

Cautious Sentiment on the Fed Side

Last month’s FOMC minutes showed that caution dominates among policymakers. Officials are carefully weighing inflation risks against potential unemployment. With the policy rate at 3.5–3.75%, the Fed has limited room to maneuver. Recent quarter-point cuts aimed to prevent sharp labor market disruptions, but now the consensus leans toward pausing. For Fed Chair Jerome Powell, this is a challenging environment.

CME FedWatch data reinforces this view. Last week, the probability of a rate hold stood at 95%, now it’s over 97%. Powell’s recent remarks underline the difficulty of balancing inflation and unemployment risks simultaneously.

Crypto Markets Feel the Pressure

Uncertainty over interest rates continues to weigh on crypto assets. The total market capitalization has approached $2.99 trillion, but this modest rise offers little confidence. Bitcoin and major altcoins are trying to hold their ground, yet the market remains fragile.

Sharp gains in gold and silver signal that risk appetite is shifting toward safe havens. This trend tempers investor enthusiasm in Bitcoin and weakens crypto’s short-term narrative.

Polymarket data shows almost a 99% probability that the Fed will hold rates. This expectation favors directionless, jittery movements rather than sudden crypto rallies. Upward attempts exist, but their sustainability is limited.

What Derivatives Markets Indicate

Derivatives indicators suggest investors are not convinced about further upside. Demand for leveraged long positions is weak, while professional traders price higher probabilities of downside risks in options markets.

Bitcoin options’ delta skew reached 12% on Monday. Normally, this indicator fluctuates between -6% and +6%. This level shows put options are trading at a premium, reflecting strong hedging demand. The last time delta skew reached similar levels was December 1, 2025, when Bitcoin dropped from $91,500 to $83,900 in hours. This market memory helps explain today’s cautious stance.

Gold at Record, Bitcoin Behind

Concerns about a weaker U.S. dollar have boosted gold prices to record levels, with spot gold briefly hitting $5,100. Analysts are questioning whether “value-loss trades” are accelerating.

Bitcoin, however, has yet to follow this trend. Even as the S&P 500 rose 0.6% in a single day, Bitcoin remained subdued. This suggests the decline cannot be solely linked to U.S. financial risks. Broader confidence issues dominate the crypto market.

In summary, the Fed’s upcoming decision could increase short-term volatility. If rates remain on hold, the crypto market is likely to continue grappling with uncertainty rather than clear direction.

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Why Are Ethereum and Altcoins Falling?

Ethereum dropped 2.3% today, trading at $4,300. It lost 6.2% over the week. The Ethereum Foundation’s deposit of 10,000 ETH ($42.7 million) to Kraken sparked the decline. Additionally, whale sell-offs and shifting investor sentiment pressured the market. However, the fear and greed index shows neutral sentiment. This did not shield ETH and other altcoins from the downturn.

World Liberty Financial (WLFI) also faced a sharp decline. Despite Trump family backing, WLFI fell 50% from its peak. Today, it dropped 8% to $0.2238. Token unlocks triggered investor sell-offs. Meanwhile, WLFI’s market cap stands at $5.54 billion. This reflects broader market pressure.

PythNetwork (PYTH) also saw a downturn. After nearly 100% gains in a day, PYTH fell 3.84% today. Mixed technical signals and profit-taking drove the decline. Still, PYTH remains up 37% weekly. Finally, Bonk (BONK) meme coin lost 1% today. A wallet linked to Galaxy Digital transferred 510 billion BONK to an exchange, increasing sell-off pressure.

How FOMC and Economic Data Impact the Market

The crypto market fluctuates with U.S. economic data releases this week. The JOLTS report comes today, followed by unemployment claims tomorrow and non-farm payrolls on Friday. These reports will influence Fed interest rate decisions. Moreover, $242 million in crypto positions were liquidated, affecting 107,700 investors.

Ethereum long positions saw $43 million in liquidations, followed by Bitcoin at $21.73 million.The market shows mixed trends. Bitcoin and XRP rise, while ETH, WLFI, and PYTH decline. This divergence stems from varying investor sentiments. Ultimately, volatility increases ahead of the FOMC meeting. Investors focus on economic data and Fed outcomes. 

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Prediction markets like Kalshi indicate declining bets on a 25-basis-point rate cut while wagers on unchanged rates are increasing. Currently, 68% of investors expect a 25-basis-point cut in September, though this share is decreasing. Conversely, 34% predict no change in Fed rates. This trend adds uncertainty to the markets. 

CME FedWatch shows a 79% chance for a 25-basis-point cut in September. Down from 99%, investors now expect two rate cuts this year instead of three. This shift encourages more cautious market behavior and delays investment decisions. 

Investors Await PCE Data While Bitcoin Holds Support 

Crypto investors closely monitor the Fed’s preferred inflation gauge, PCE data. In June, U.S. PCE inflation rose 2.6% year-over-year, exceeding May’s upwardly revised 2.4% estimate. These figures will be crucial for the Fed’s September decisions, with results scheduled for August 29. 

Bitcoin finds support near $112,000, and analysts suggest buying on dips. Michael van de Poppe notes that BTC follows classical price movements. He recommends accumulating if prices fall below $110,000. Rekt Capital recalls Bitcoin fell 29% in 2017 and 25% in 2021. Over the last 24 hours, BTC dropped 0.31% to $112,892. Trading volume fell 10%, signaling reduced investor interest. 

This uncertainty and volatility affect global markets and encourage cautious investor behavior. All eyes remain on the August 29 PCE release. Fed Chair Powell’s Jackson Hole speech and rising U.S. 10-year Treasury yields, alongside the DXY dollar index hitting 98.34, continue to influence market dynamics. 

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Federal Reserve Discusses Inflation and Tariff Risks 

The U.S. Federal Reserve (Fed) made significant decisions during its Federal Open Market Committee (FOMC) meeting on May 6-7, 2025. Officials highlighted that tariffs could increase inflation, creating a challenging dilemma for interest rate policy. The minutes emphasized a cautious approach amid rising economic uncertainties. The Fed kept the federal funds rate steady at 4.25%-4.5%. Officials noted that economic growth remains solid, but risks of labor market weakening have increased. While consumers continue spending, concerns about persistent inflation have grown. Additionally, policy uncertainties are complicating the goals of full employment and low inflation. 

The Fed expressed concerns about variability in trade policies. Tariffs between the U.S. and China eased after the meeting, with both sides suspending heavy taxes for a 90-day negotiation period. This supported a recovery on Wall Street. However, bond yields continued to rise. Powell defended the Fed’s independence against Trump’s pressure for rate cuts. The meeting also reviewed the Fed’s five-year policy framework. Officials evaluated the “flexible average inflation targeting” strategy, noting it could be ineffective during major inflationary shocks. No plans to change the inflation target were announced. 

Trade Policies and Financial Stability Risks 

The Fed discussed the volatile policies of the Trump administration. While tariffs were suspended, they were not fully lifted. Officials noted that bond market volatility could threaten financial stability. Rising Treasury yields may have long-term economic impacts. The risk of both inflation and unemployment rising was emphasized, potentially forcing the Fed into a tough choice between tight monetary policy and supporting growth. Additionally, the Fed renewed dollar and currency swap lines to support global financial stability, aiming to address liquidity needs. 

Post-meeting, Trump delayed 145% tariffs on China, impacting bond yields and recession expectations. Consequently, markets do not expect a rate cut until the September meeting. The Fed is awaiting greater clarity due to policy uncertainties. Officials acknowledged the increasingly complex economic outlook. Inflation nearing the 2% target is making the Fed’s decisions more challenging. Financial market volatility is heightening recession risks. The Fed aims to both control inflation and support growth. 

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Stablecoin Supply and Crypto Market Correction Indicate We Are in the Middle of the Bull Cycle

According to analysts, the current cryptocurrency market correction, combined with the steady rise in stablecoin supply, suggests that we are in the middle of the bull cycle, not at its peak.

The total stablecoin supply has surpassed $219 billion, indicating that we are still far from the peak of the current cycle.

Historically, stablecoin supply peaks have often aligned with the peaks of crypto cycles.

Crypto analysis platform IntoTheBlock stated in a post on March 14:

“In April 2022, the supply reached $187 billion—just as the bear market began. Now it’s risen to $219 billion and continues to grow, indicating we’re likely in the middle of the cycle.”

Increasing stablecoin inflows to crypto exchanges may signal rising buying pressure and growing investor interest, as stablecoins serve as the main investment vehicle from fiat currencies into the crypto world.

However, Ether’s price has fallen by more than 52% in the last three months, and after peaking above $4,100 on December 16, 2024, analysts expect the price to drop below $1,900, a “strong” demand zone that may attract further investment.

Analysts Predict Potential Directionless Market Ahead of FOMC Meeting

Despite the rising stablecoin supply, the crypto market may experience directionless movement ahead of the upcoming Federal Open Market Committee (FOMC) meeting next week.

Stella Zlatareva, news editor at Nexo digital asset investment platform, stated that the crypto market continues to be influenced by macroeconomic developments:

“Bitcoin’s movement below key technical levels, mirroring the S&P 500’s trajectory, highlights the market’s cautious tone as traders await key economic data and the FOMC meeting for direction.”

Zlatareva added: “All eyes are on next Wednesday’s FOMC meeting, which promises to provide insights into U.S. monetary policy and potential interest rate adjustments, especially with recent declines in the U.S. Producer Price Index (PPI) and initial jobless claims, signaling a slowing economy.”

These predictions come just days ahead of the FOMC meeting scheduled for March 19. According to current market data, CME Group’s FedWatch tool is pricing in a 98% chance that the Fed will keep interest rates steady.

Despite the possibility of short-term volatility, investors remain optimistic for the rest of 2025. VanEck predicts that Ether’s price could reach $6,000 and Bitcoin’s could reach $180,000 during 2025.

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