Bitcoin Price Volatility: Federal Reserve Policy Announcement, Inflation Figures, and SEC Lawsuit Impact

As Bitcoin continues to captivate the attention of investors and traders worldwide, its price hovers around the $255.8K mark, reflecting the recent intraday range. All eyes are now on the upcoming key policy announcement by the U.S. Federal Reserve, which is expected to mark a significant shift in the aggressive rate-hiking cycle initiated in March of the previous year.

Federal Reserve's Expected Policy Shift

The U.S. Federal Reserve is anticipated to deviate from its previous rate-hiking approach, planning to increase bank rates by 500 basis points (5.0% to 5.25%) at its latest meeting. This departure from the norm has sparked curiosity and speculation among market participants.

Accompanying the policy statements and press conferences after the meeting with Fed Chairman Powell, the Federal Reserve will reveal its latest economic forecasts and new dot plots. These projections, made by Fed policymakers, outline their predictions for interest rates in the coming years.

The upcoming Fed announcement is expected to trigger significant volatility in the cryptocurrency market. Market participants are closely watching two additional forward-looking factors: Fed policymakers' expectations regarding the economic and financial outlook. Interestingly, Bitcoin experienced a temporary rise as inflation eased, following the release of the May Consumer Price Index (CPI) data.

Bitcoin's Performance Amidst SEC Lawsuit Concerns

Despite ongoing concerns about the Securities and Exchange Commission (SEC) lawsuit against leading crypto exchanges Binance and Coinbase, Bitcoin has shown resilience. Investors are shifting their focus to eagerly await the latest inflation figures and the Federal Reserve's interest rate decision.

The U.S. inflation rate released on June 13 came in slightly below the forecast of 4.1% for May, with the consumer price index rising by 4% on a year-on-year basis. The core CPI, which excludes volatile sectors such as food and energy, surpassed expectations with a 5.3% increase. These figures prompted a temporary price spike in Bitcoin, pushing it to a three-day high above $26,400 before losing momentum.

Past Consumer Price Index releases have demonstrated a stronger impact on Bitcoin's volatility, with notable four-digit gains observed. A decrease in the CPI reading could signal a shift in the U.S. Federal Reserve's monetary policy of raising rates, which could positively impact risk assets like Bitcoin. It appears likely that the Fed will conclude a year of tight monetary policy, contrasting with the rate hikes implemented a year ago when the CPI was at 8.6%.

SEC Lawsuit's Influence on Market Confidence

Market experts suggest that the SEC lawsuit against prominent cryptocurrency companies brings a sense of "safety" by ending speculation about potential legal action. Furthermore, this lawsuit could prompt discussions among courts and regulators regarding the classification of cryptocurrencies as securities, commodities, or other asset types.

The lawsuit's resolution may encourage new investments in cryptocurrencies, particularly from U.S. investors. With the possibility of reduced regulatory uncertainty, investors may consider these digital assets as unrelated to the U.S. economy or politics.

As the Federal Reserve's key policy announcement approaches, the cryptocurrency market braces for increased volatility. Bitcoin's performance in response to inflation data and the outcome of the SEC lawsuit will be closely monitored. The impact of these events on the market and the potential for new investment opportunities may shape the future trajectory of cryptocurrencies.