Bitcoin has rebounded to $98,000 after the Federal Reserve decided to maintain interest rates. This comes amidst pressures from President Trump regarding rate cuts. Fed Chair Jerome Powell cited higher unemployment risks and persistent inflation concerns. The market anticipates rate cuts by 2025, while Bitcoin’s rising interest is reflected in a surge of ETF inflows. However, some warn about potential market downturns if rates remain unchanged.
Bitcoin has bounced back to $98,000, marking a notable rise after lingering below that threshold for nearly three months. This resurgence came in the wake of the US Federal Reserve’s recent decision to keep interest rates steady, a choice that comes amidst various pressures from President Donald Trump who has been vocal about his discontent with the Fed’s actions. A few weeks back, Trump even suggested he might dismiss Fed chair Jerome Powell for delaying rate cuts.
Federal Reserve Chair Jerome Powell explained on May 7 why the rates stayed unchanged within the 4.25%-4.50% range. He pointed to increasing risks of unemployment and inflation as major factors in their decision. While Powell noted inflation has seen significant reduction, it still edges above their long-term target of 2%. He highlighted a notable decline in sentiment from both households and businesses, which was largely influenced by Trump’s trade policies. Nevertheless, he reassured that the economy remains stable despite the prevailing uncertainty.
Leading up to the Fed’s announcement, market indicators from CME Group’s FedWatch Tool showed little expectation for rate cuts in the near future. Powell mentioned that the current unemployment rate is relatively low, suggesting that, overall, the employment landscape is solid. Predictions indicate that the Fed funds rate could dip to 3.6% by the end of 2025, which is quite a while off.
Following Powell’s comments, Bitcoin initially dropped to around $95,866 but reversed course swiftly, hitting $98,000 just hours later for the first time since February 21. The cryptocurrency market seems to be picking up steam, as illustrated by the Crypto Fear & Greed Index moving back into ‘Greed’ territory recently. Moreover, Bitcoin ETFs have attracted close to $4.41 billion in inflows since the end of March, signalling renewed interest.
Looking back, on March 9, economist Timothy Peterson raised alarms about the potential risks of the Fed holding rates steady, warning it might ignite a broader market slump that could push Bitcoin back toward $70,000. This concern emerged after Powell expressed a measured stance in March, stating they would not rush their decisions and are well-positioned to wait for further economic clarity.
It’s essential to note that this article does not provide investment advice or recommendations. All trading decisions involve risk, and readers are encouraged to do their own thorough research before acting on market information.
