The major cryptocurrencies pulled back this morning after moving higher over the weekend, as the market turns its full attention to the Federal Reserve's upcoming policy meetings on Tuesday and Wednesday, which are widely expected to culminate in the first cut to interest rates since early 2020.

The world's largest cryptocurrency, Bitcoin (CRYPTO: BTC), traded nearly 3% lower. In comparison, the world's second-largest cryptocurrency, Ethereum (CRYPTO: ETH), and the meme token Dogecoin (CRYPTO: DOGE) both fell 5.8%.

No apparent reason

There was no obvious reason behind the move this morning, though crypto may be taking a breather after getting a leg up this weekend, and the Fed's meeting is still clouded in mystery. The big question is whether the Fed will lower rates by 25 or 50 basis points.

Recently, traders have gotten more bullish on the larger cut, with CME Group's FedWatch tool showing that 61% of traders are betting on a 50-basis-point cut. That's up from a 50-50 split on Friday. It's surprising to see crypto down because lower interest rates tend to favor risk-on assets and lead to a lower dollar, both of which are conditions that cryptocurrencies have historically performed well in.

Still, many are divided on what will come out of the Fed meeting and on the coming trajectory of interest rates. (Remember that investors are always looking ahead.)

"The cut is less important than the signaling during the press conference and the release of the updated dot plot," Sean McNulty, director of trading at liquidity provider Arbelos Markets, told Bloomberg this morning. "If the guidance and press conference is significantly dovish, we'd expect Bitcoin to outperform to the topside."

Others are not convinced the Fed has entirely won its war with inflation, despite a 2.5% headline August reading from the Consumer Price Index last week. Just last week, JPMorgan Chase's CEO Jamie Dimon said he wouldn't completely rule out stagflation -- high unemployment and high inflation -- which he deemed as the "worst outcome" for the economy.

Dimon hasn't always been right with his economic forecasts -- he suggested last year that interest rates could hit 7%. Still, he's not one you want to bet against, given his track record. He also correctly positioned JPMorgan to hold cash earlier in the cycle rather than investing too heavily in long-dated, low-yielding securities like other peer banks.

This outlook should be viewed favorably by crypto investors

Given the increased outlook for a half-point hike on Wednesday, I am surprised to see crypto trading lower this morning. Again, the industry has largely performed well under lower interest rates and a lower dollar. However, crypto can be very volatile, so predicting the day-to-day movement of individual tokens is a fool's errand.

I continue to view Bitcoin and Ethereum as crypto tokens that investors can hold at least a small portion of in their portfolios. Bitcoin has a finite supply and may be able to serve as an inflation hedge. Ethereum has strong real-world utility, given the technology behind its network. Both have also seen enhanced liquidity with the introduction of exchange-traded funds. I do not recommend holding any real position in Dogecoin. I do not see any compelling features of the token other than a speculative, social-media-fueled upside.

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Bram Berkowitz has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and JPMorgan Chase. The Motley Fool recommends CME Group. The Motley Fool has a disclosure policy.

Why Bitcoin, Ethereum, and Dogecoin Are Falling Today was originally published by The Motley Fool