The total market value of cryptocurrencies has fallen below $1 trillion as the Federal Reserve monetary policy meeting is about to begin

The Federal Reserve will hold a new monetary policy meeting from September 20 to 21. The market generally expects the Federal Reserve to raise interest rates by 0.75 percentage points for the third consecutive time to combat high inflation. With the monetary policy meeting imminent, BTC fell below $19,000, ETH fell below $1,300, and the total market value of cryptocurrencies fell below $1 trillion.

In terms of market sentiment, on September 19, the Fear and Greed Index was 21 (yesterday it was 27), and the degree of panic increased compared with yesterday, and the level changed from panic to extreme panic.

Earlier, analyst TedTalksMacro tweeted that the Federal Reserve will announce their decision on U.S. monetary policy next week, which will affect Bitcoin and other cryptocurrencies. Currently, the market has mostly digested a 75 basis point rate hike and has discounted the possibility of a 100 basis point rate hike. According to the CME FedWatch tool, the probability of a 100 basis point rate hike is only 18%.

The Fed's policies play a key role in the current crypto market. It is worth noting that in order to curb high inflation, in addition to raising interest rates to a level that restricts economic activity, most of the 44 economists surveyed believe that the Fed will maintain peak interest rates for some time. Easing price pressures, financial market instability and deteriorating labor markets are the most likely reasons for the Fed to pause its tightening actions, but 68% of respondents said they expect the Fed to lower the federal funds rate until 2024 at the earliest. A quarter of them expect the Fed to not cut interest rates until the second half of 2024 or later.

Not long ago, former U.S. Treasury Secretary Lawrence Summers opposed the Fed's decision not to adopt an aggressive monetary tightening policy, saying that any hesitation would cause greater economic losses. "There are many, many examples in history of policy adjustments to inflation being overly delayed, and a very high price has been paid for this," Summers said. Economists predict that Federal Reserve Chairman Powell and his colleagues will raise the benchmark interest rate by 75 basis points next week, raising the upper limit of the target range to 3.25%. Interest rate futures show that policymakers will push it to 4.5% by the spring of 2023. "We are more likely to end up above 4.5% than below 4.5%, and I certainly would not be surprised if the interest rate has to go above 5," Summers said.

In response, Rabobank said it had further raised its forecast for the Federal Reserve's federal funds rate, predicting that the Fed will raise interest rates by 75 basis points next week, but the risk of a 100 basis point increase remains. The bank said it expects the upper limit of the federal funds rate target range to reach 5% next year, rather than the previous long-term forecast of 4.50%. The reason for this forecast is that the bank believes that the wage-price spiral has begun, which will keep inflation high. In addition, given that the Fed clearly puts the task of fighting inflation above achieving full employment, this will push the Fed to raise its current interest rate expectations, and it will not change its hawkish monetary policy stance until 2024.

Meanwhile, German central bank President Joachim Nagel said the ECB must respond firmly to inflation that could reach double digits later this year. "If the data trend continues, there will have to be more rate hikes - this is already agreed in the Governing Council," he said on Sunday. "In October and beyond, we have to be determined." "We have to get inflation back under control. We must not let our guard down, even if the economy worsens," Nagel said.

In addition, ECB Chief Economist Lane said the ECB will raise interest rates "a few more times." He said in an interview that the ECB is still in the stage of raising interest rates. He mentioned the forecast of the International Monetary Fund and said that the possibility of a mild recession in the eurozone cannot be ruled out.

Against this backdrop, billionaire Jeffrey Gundlach, the "new bond king," warned that deflation risks are increasing and it is time to be bearish on the stock market. Gundlach also said it is too early to join the cryptocurrency craze because the Federal Reserve may raise interest rates further. When asked if the current market conditions are a good time to buy cryptocurrencies, Gundlach responded, "I certainly wouldn't buy it today." When the Federal Reserve shifts from its interest rate hike policy and begins its "free money" policy, it will be time to buy cryptocurrencies.

It is worth mentioning that crypto analyst Benjamin Cowen said that Ethereum (ETH) is expected to witness great pain because Bitcoin (BTC) and the stock market are in a downward trend. Since Ethereum's volatility is significantly higher than Bitcoin and the stock market, Cowen pointed out that ETH's key technical support is farther away than other assets. Analysts say that Ethereum will be hit hardest in the decline of all risky assets.