January 26 News, the Federal Reserve will announce its first interest rate decision for 2026 this week. The market almost unanimously expects the benchmark interest rate to remain unchanged within the 3.5% to 3.75% range. Derivatives data shows that the probability of holding rates steady has exceeded 96%, with the forecast platform’s probability even approaching 100%. After three consecutive 25 basis point rate cuts, this meeting is seen as a crucial turning point in whether the policy pace continues to be accommodative.
For the crypto market, the real focus is not on the decision itself but on Powell’s post-meeting press conference. Whether he hints at resuming rate cuts in the coming months will directly influence the strength of the US dollar and the pricing of risk assets. Morgan Stanley expects the policy statement to retain language indicating “remaining flexibility for future adjustments,” which is often interpreted as a dovish signal. Once confirmed, this usually benefits Bitcoin and US stocks. Conversely, if Powell emphasizes inflation risks and suppresses rate cut expectations, a stronger dollar could put downward pressure on Bitcoin.
There are also disagreements within the Federal Open Market Committee. Stephen Miran, nominated by Trump, is expected to vote against further easing, supporting a more aggressive stance. The more such voices there are, the easier it becomes for the market to preemptively bet on subsequent monetary easing, pushing up high-risk assets including Bitcoin.
Macro variables are equally complex. The Trump administration proposed purchasing approximately $200 billion in mortgage-backed securities to lower mortgage rates and restrict large institutions from buying single-family homes. Some asset management firms warn that such measures could stimulate demand and drive up home prices, thereby exacerbating inflation expectations. ING’s analysis points out that if Powell defends maintaining high interest rates during the press conference, the dollar could strengthen further, which would be unfavorable for dollar-denominated crypto assets.
On the foreign exchange front, there are signs that the Fed may coordinate with Japan to intervene in the USD/JPY exchange rate. Historically, Bitcoin has shown a negative correlation with the dollar and a positive correlation with the yen. If the dollar is sold off and the yen strengthens, short-term market volatility could be amplified.
Amidst the intertwining signals from multiple policies and currencies, this Fed rate decision and Powell’s wording are very likely to be key catalysts in determining Bitcoin’s short-term direction.
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