By Omkar Godbole (All times ET unless indicated otherwise)
The main event for the crypto market on Wednesday is the Federal Reserve interest-rate decision, due at 2 p.m. Key volatility indexes, however, indicate that traders do not expect extraordinary price swings.
While the bank is expected to keep interest rates steady between 3.5% and 3.75%, Chairman Jerome Powell's post-meeting press conference could steal the show.
Traders will want to know whether Powell and his team see the pause in rate cuts as temporary, or whether the recent strong U.S. GDP data and forecasts of an inflation resurgence have made them more cautious. The former scenario could accelerate the recovery rally in bitcoin and the broader market.
That said, Volmex's one-day implied volatility index tied to bitcoin remains pinned near an annualized 40%, right in the middle of the monthslong range of 20%-60%. That equates to a 24-hour price swing of just 2%. One-day volatility indexes for XRP, ETH, and SOL also indicate only mild volatility ahead.
Bitcoin topped $89,000 early today, extending its recovery from weekend lows near $86,000. Other major tokens also found a footing, including decentralized exchange Hyperliquid's HYPE token, which has gained over 50% this week. The CoinDesk Memecoin Index (CDMEME) has rallied over 17% in 24 hours, a sign of renewed speculative interest in the market.
Apart from the Fed, the key question for the market is whether the U.S. government can avoid another shutdown as the Congress approaches its Friday funding deadline.
"A timely stopgap or agreement should compress near-term risk premia and let crypto trade more like straight beta," QCP Capital said in a market note. "A brief lapse can still produce a quick risk-off wobble that retraces once a deal lands. But a drawn-out standoff is the scenario that meaningfully tightens liquidity and forces broader de-risking."
In traditional markets, oil rallied to a four-month high. A sustained move higher could generate an inflationary impulse worldwide, weakening the case for rate cuts. Stay alert!
Read more: For analysis of today's activity in altcoins and derivatives, see Crypto Markets Today
For a more comprehensive list of events this week, see CoinDesk's "Crypto Week Ahead".
• Jan. 28, 1 p.m.: Hedera Network to undergo a mainnet upgrade expected to take approximately 40 minutes to complete.