Bitcoin continues to make impressive strides, recently trading around $84,393.09, up nearly 4% after the Federal Reserve’s decision to leave interest rates unchanged. The move is part of the Fed’s effort to maintain its target range for interest rates between 4.25% and 4.5%. While policymakers did not announce any immediate rate cuts, they reiterated their expectations for two rate cuts in 2025, which presents a mixed signal for risk assets like Bitcoin.
Fed’s Decision and Its Impact on Bitcoin
The markets had already anticipated very little chance of a rate increase at the Federal Open Market Committee (FOMC) meeting this week. However, investors kept a close watch on updates regarding economic growth and inflation. In response, the Fed adjusted its GDP growth forecast to 1.7% for 2025, down 0.4 percentage points from its December projections, signaling concerns over a potential slowdown in the economy.
Additionally, inflation expectations have risen, which points to the Fed’s cautious approach to future rate cuts. Despite the decision to slow down its “quantitative tightening” program—which gradually unwinds the central bank’s bond holdings—the Fed’s actions appear more dovish. However, analysts suggest that this alone may not be enough to fuel a significant rally in Bitcoin.
Stock Market Response
On the heels of the Fed’s announcement, U.S. stock markets saw positive gains. The Dow Jones Industrial Average rose by 300 points, or 0.7%, while the S&P 500 climbed 1%. The Nasdaq Composite led the rally with a 1.4% increase, reflecting optimism in risk assets such as stocks and Bitcoin.
Future Outlook for Bitcoin and Rate Cuts
Matt Mena, a crypto research strategist at 21Shares, suggested that a decline in inflation could lead the Fed to accelerate rate cuts. This would provide more liquidity to the market, potentially driving up the prices of Bitcoin and other risk assets.
While Bitcoin has been holding steady and nearing the $90K mark, it will likely depend on future inflation trends and the Fed’s actions in 2025 to determine whether this upward momentum will continue.
Conclusion
Bitcoin’s recent price surge to nearly $85K, following the Fed’s decision to hold rates steady, signals a strong market response to the central bank’s cautious stance. Although concerns over inflation and a slowing economy persist, the expectations for future rate cuts provide hope for continued liquidity and growth in the cryptocurrency market. Investors and analysts will be closely monitoring economic developments in the coming months to gauge the potential for further price gains.
Related topics:
