Crypto Fundamental Analysis: Fed comments weigh on the market

The cryptocurrency market continues to show a lack of strength and confidence in the final moves of the week. One of the most relevant events behind this caution has been the US central bank decision, which so far has not created an ideal environment for market liquidity to remain stable.

To some extent, the Federal Reserve announcement seems to have reduced appetite for risk assets such as cryptocurrencies once again. For this reason, the central bank event remains an important catalyst that may be limiting crypto market confidence in the short term and keeping a phase of indecision in place over the coming sessions.

Federal Reserve week

The US central bank decision was one of the main catalysts of the week. Although the institution decided to keep interest rates unchanged at the 3.75% reference level, the comments that followed were relevant. The Fed noted that inflation has remained elevated for more than five years and is still far from the 2.00% target, meaning the central bank could be forced to take additional steps to control inflation pressures more effectively.

This message pointed to a Federal Reserve that could adopt a more aggressive stance over the coming months.

Alongside the decision, the central bank also released the dot plot from its participants. It showed that the expected median rate for 2026 now stands at 3.8%, compared with 3.4% projected in March. Inflation expectations for the year were also revised higher, which has led markets to show greater caution toward possible interest rate increases in the United States.

This shift is already reflected in the CMEGROUP probability table, where there is now a probability slightly above 51% that the Fed could raise interest rates toward a new level near 4.00% at the September meeting. This shows that markets now expect a potentially more aggressive Federal Reserve than they had anticipated a few weeks ago.

Source: CMEGROUP

This scenario is not particularly favorable for cryptocurrency market confidence in the short term. Higher interest rates in the United States can create an environment where borrowing costs increase and available market liquidity starts to decline. In addition, this type of backdrop can also raise concerns about a possible economic slowdown, which usually reduces appetite for risk assets such as cryptocurrencies and favors a rotation toward more stable markets.

For this reason, under a more restrictive monetary policy scenario, cryptocurrencies could struggle to sustain consistent demand.

In fact, this lack of strength in demand is already starting to show in Bitcoin ETF flows. Over the past week, the market has recorded only net outflows, a trend that continued after the US central bank decision. On June 17, for example, outflows exceeded 100 million dollars, reflecting that caution was already present before the Fed decision and continued after the announcement.

Source: Theblock

With all this in mind, a more aggressive central bank could continue to make the short-term environment more difficult for cryptocurrencies. If expectations of a more restrictive Fed remain in place, the recovery in demand could stay limited, and the crypto market could continue to show a phase of indecision over the coming sessions.

 

Bitcoin compared with other markets

One of the behaviors that has started to gain relevance in the short term is the increase in the inverse correlation between the DXY dollar index and Bitcoin price action. Now, the coefficient is close to -1, showing a strong negative correlation between both markets over the last 25 sessions. It is important to remember that correlation coefficients can change over time.

Source: Data – TVC, StoneX, Tradingview

This relationship is relevant because, while the US dollar has regained strength, Bitcoin has started to show more consistent weakness over the same period. This suggests that market appetite may be shifting toward more stable assets, such as the dollar, while demand for cryptocurrencies has moved into the background.

For now, some more defensive substitute markets appear to be changing the short-term dynamic and weighing on confidence in the crypto market.

As long as other markets remain more attractive in the short term and the inverse correlation between the dollar and Bitcoin stays in place, cryptocurrencies could continue to lose appeal. If capital flows fail to stabilize as a relevant source of demand, the crypto market could continue to face periods of weakness and indecision over the coming weeks.

 

Confidence remains in sensitive territory

Looking at the Crypto Fear and Greed Index, the indicator has not managed to show relevant progress. Now, it remains near the 20-point area, very close to “extreme fear” territory. This shows that the confidence backdrop in the crypto market remains fragile, and for now, there is no consistent recovery, pointing to stronger short-term demand.

Source: Coinmarketcap

This behavior indicates that market participants remain significantly concerned about cryptocurrencies. If the index does not advance consistently, it will be difficult to talk about an ideal environment for stronger short-term demand. This could also continue to signal a phase of indecision, or even relevant weakness, in the crypto market over the coming sessions.

 

Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25