AnticipationRunning High for Bitcoin as Fed Prepares to Announce Interest Rate Decision
Federal Reserve's Interest Rate Decision Leaves Crypto Market on Edge
The crypto market is holding its breath as the U.S. Federal Reserve (Fed) prepares to announce its decision on interest rates tonight at 8:00 PM (French time). The Fed is expected to hold interest rates steady at 4.25% to 4.5%, a choice that could have mixed but notable impacts on Bitcoin and the broader cryptocurrency market.
With political tension around Fed Chair Jerome Powell, investors remain cautious, as reflected in the reduced market activity. The trading volume of Bitcoin has decreased by 6% to reach $63 billion over the last 24 hours, while the open interest in BTC futures contracts has dropped by 2.55% to $83.6 billion. Liquidations totaling $3.56 million have occurred, mainly affecting long positions.
Bitcoin, currently trading at approximately $118,300, has decreased by 0.35% over the last 24 hours. Ethereum (ETH) has experienced a limited drop of 1.8%. Many other cryptocurrencies are suffering significant losses as well.
When the Fed keeps rates unchanged amid economic uncertainty and inflation concerns, it may influence investor behavior in several ways. Stable or elevated interest rates generally make traditional fixed-income investments more attractive relative to riskier assets like cryptocurrencies, which could reduce demand for Bitcoin and altcoins, potentially putting downward pressure on prices.
However, some investors may still view Bitcoin as a hedge against inflation, which could provide support to crypto prices despite steady rates. The Fed's pause signals caution, keeping liquidity conditions tighter than in a low-rate environment, which may limit speculative investment inflows into crypto.
Gaston Cuny, a writer with 7 years of experience and a cryptocurrency enthusiast since 2020, aims to share knowledge and findings about the crypto ecosystem. According to him, holding rates steady tends to temper the enthusiasm for cryptocurrencies as speculative or inflation-hedging assets, though ongoing inflation concerns could still maintain some baseline demand for Bitcoin. The broader crypto market often reacts to Fed moves with volatility influenced by shifts in risk appetite and macroeconomic outlook.
The monetary policy choice by the Fed is considered critical, as it can impact not only the crypto market but also the broader economy. U.S. President Donald Trump has publicly criticized an expensive renovation project at the central bank's headquarters, adding an element of uncertainty to the situation.
Regardless of the expected status quo, the crypto market remains volatile, reflecting the dynamic nature of this rapidly evolving industry. As always, it's essential for investors to stay informed and make informed decisions based on their risk tolerance and investment goals.
[1] Source: CoinMarketCap [2] Source: The Wall Street Journal
Investors in technology-driven assets like cryptocurrencies may be affected by the Federal Reserve's decision to maintain interest rates, as a higher interest rate might reduce demand for riskier assets like Bitcoin and altcoins, potentially causing prices to decrease. Moreover, ongoing concerns about inflation could still maintain some baseline demand for Bitcoin, highlighting the complex relationship between cryptocurrencies and monetary policy.
In light of the political tension surrounding Fed Chair Jerome Powell and the economic uncertainties, some investors might view Bitcoin as a potential hedge against inflation while others might be hesitant to invest due to increased interest rates, leading to market volatility in the cryptocurrency space.
