A look at how the upcoming FOMC meeting will affect demand for Shiba Inu. A bullish bias is forming, but investors are still cautious awaiting final results.
The Shiba Inu community is undoubtedly pleased with SHIB’s performance in January. But as the month draws to a close, there is a sense of uncertainty in the market again, especially with regard to February’s performance.
The upcoming FOMC meeting will likely have the biggest impact on Shiba Inu holders’ portfolios.
An understanding of what the FOMC meeting is allows Shiba Inu holders to better understand how it affects their portfolio.
Well, for starters, the meetings are held once every three weeks and one of the main highlights is the revision of the Federal Fund rate. The latter is the rate at which banks borrow from the Federal Reserve.
The link between the FOMC and Shiba Inu price action
The Federal Reserve uses the Federal Fund Rate as a tool to balance the economy. A lower rate means it is cheaper to borrow, giving people easier access to liquidity and therefore an easier investment climate.
On the other hand, higher interest rates make borrowing less attractive and discourage investment.
The Federal Fund Rate increased in 2022 largely as part of the FED’s quantitative tightening measures to curb inflation.
Shiba Inu and the rest of the market experienced a bullish rise after the last FOMC meeting. This is because the FED has only raised interest rates by 0.5%, or 50 basis points, compared to 0.75%, or 75 basis points, in the previous month’s announcement.
Source: Macrotrends
The market interpreted the lower FFR as a sign that the FED was tapering off its aggressive rate hike. This was also accompanied by reports that the FED has seen positive results in its fight against inflation. The next FOMC meeting will be on January 31 and February 1.
How will the FOMC’s next FFR affect Shiba Inu?
There is speculation that the FED will raise the FFR by 25 basis points. If this proves to be true, it may support bullish sentiment and thus SHIB may again experience buying pressure.
With such a result, it could overcome the resistance we have observed in recent days at the $0.0000123 price level.
Source: TradingView
If a rally is a godsend, Shiba Inu investors can expect the price to rise as much as 14% to the next Fibonacci resistance line.
If the rate hike is higher, it could falsify investors, triggering another sell-off for Shiba Inu.
A pullback of 10% or more could be at stake and that outcome will take it closer to or below the 200-day MA.
The coming week 🫡
Wednesday: US FOMC [25bps hike priced with 98% probability, another 25bps in March is likely]
Thursday: UK + European Central Bank meetings
Friday: US NFP labor market data [Unemployment rate to tick higher from 3.5% to 3.6%, 193k jobs exp. to have been added]
— tedtalksmacro (@tedtalksmacro) January 29, 2023
How are the markets reacting so far?
Sometimes the market starts reacting even before the actual FOMC minutes are released. Some speculate that this is because people in privileged positions know about the FED’s interest rate decision before it is officially released.
As such, some market participants may have privileged access, allowing them to respond accordingly.
Interestingly, the Shiba Inu’s sentiment-weighted statistic registered a slight increase over the past two days. This could indicate that optimism is returning to the market.
Well, this isn’t necessarily confirmation that investors are expecting another increase, especially with expectations leaning toward a 25 basis point increase.
Source: Sentiment
Meanwhile, price volatility has eased slightly in recent days, but a new increase may be on the way. This is because the FOMC data may spark more trading activity this week.
Exchange flows also point to a similar result. The supply on exchanges has fallen sharply in recent days, while the opposite is true for the supply outside exchanges.
Source: Sentiment
The above statistics confirm that there is more demand for SHIB than sales pressure. Still, this is no confirmation that the bulls will prevail.
There is still plenty of time for a bearish pivot, especially if the FOMC decides to push a rate hike higher than expected.
Once the official data is out, we are likely to see an increase in directional momentum. SHIB traders and investors can take advantage of the ensuing trend which offers opportunities for short term gains.
But for now, the best strategy would be to wait the play out of the market.
This post How the upcoming FOMC meeting will affect the portfolio of Shiba Inu holders
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