The cryptocurrency market could experience a near-term downside correction, as suggestions the U.S. Federal Reserve will postpone a rate cut have yet to be priced in, according to an analyst.

Bitfinex Head of Derivatives Jag Kooner said "the market is currently pricing the Fed being more dovish than Federal Reserve Chair Powell’s statements would imply."

The Bifinex Head of Derivatives added that a lag in the market pricing in Powell's latest statements could result in a downside correction for bitcoin, alongside other cryptocurrencies and financial markets. "The cryptocurrency market could decline in the near-term if the market expectations for a rate cut continue to be high and the next FOMC meeting also results in a pause," Kooner told The Block.

Fed rules out rate cut in March

On Sunday, Federal Reserve Chair Jerome Powell ruled out an earlier rate cut in 2024, despite wider markets anticipating the commencement of the central bank's rate-cutting cycle in March.

When interviewed on CBS' 60 Minutes, Powell stated that a rate cut in March is "not likely" to happen. “We’ve said that we want to be more confident that inflation is moving down to 2%,” Powell added. “I think it’s not likely that this committee will reach that level of confidence in time for the March meeting, which is in seven weeks.”

Kooner added that Powell's signaling of a rate cut postponement "has potentially contributed to a risk-off sentiment in the market."

Risk-off sentiment pervading the market

There are other lingering uncertainties in current market conditions that are contributing to this risk-off sentiment, according to BIT Mining Chief Economist Youwei Yang.

"The rate cut delay, less likely soft landing, as well as dotcom bubble type of patterns showing in AI stocks are worrying the markets turning into risk-off sentiment now, that could lead to a broad sell-off triggered by any new event such as CPI data," Yang told The Block.

According to Vertex Protocol Co-Founder Darius Tabai, there is still no definite clarity on when rate cuts will come into effect. "For now, it makes no sense to see huge moves in either direction given the levels of inflation and rates as central bankers tend to be slow moving in their analysis," Tabai told The Block.

The largest digital asset by market capitalization traded flat on Wednesday, changing hands for $43,032 at 8:45 a.m. ET, according to The Block's Price Page.

Bitcoin BTC +2.31% has held above the $43,000 mark on Wednesday. Image: The Block.