Simply put
- The US Federal Reserve has been careful about reducing interest rates this year.
- Bitcoin is currently trading about 5% below its record high from last month.
- The cryptocurrency market has experienced volatility due to the US trade war and increasing tensions in the Middle East.
Since the US Central Bank made it clear it wouldn’t adjust interest rates until there is strong evidence that inflation is under control, Bitcoin has remained relatively stable.
The largest cryptocurrency by market capitalization is trading around $104,250. It has seen a slight uptick in the last 24 hours, according to Coingecko. Despite this, Bitcoin is still about 5% down from where it was a month ago during a broader decline in the crypto market.
Ethereum has also been stagnant recently, while Solana has made modest gains following the Fed’s announcement. Overall, most altcoins have struggled over the last month.
The crypto market had largely anticipated the Federal Reserve’s decision, with the CME FedWatch tool predicting a 99% likelihood of no rate changes.
The last time the Fed reduced rates was in December. The stance during their March meeting aligned with the earlier “dot plot” projection, which suggested two potential rate cuts.
While the Fed noted that “uncertainty regarding the economic outlook is decreasing,” they emphasized that they will cautiously evaluate incoming data and risks before making any further decisions.
Attention is also focused on surprising inflation readings. Recently, the consumer price index unexpectedly rose by 0.1% compared to April, bringing the annual rate to 2.4%, close to the Fed’s target of 2%. Meanwhile, private consumer spending in April was up just 0.1%, as investors have been looking to keep prices in check.
The Fed is also mindful of how President Trump’s trade policies could affect prices and potentially push the economy into a recession.
Following the Fed’s decision, Jerome Powell mentioned that the impact of tariffs is uncertain regarding duration and timing.
He expressed, “I know the time is coming. It could be soon, it could take a while. But as long as the economy remains strong, with a decent labor market and controlled inflation, I think we’re in a good place.”
Trump has often pressured the Fed to lower interest rates and criticized Powell for being stagnant. Recently, he labeled the Fed’s decisions as “silly,” suggesting that there’s “no inflation” currently because of tariffs.
Reducing interest rates might support the crypto market by injecting more liquidity, something Bitcoin notably responds to.
Heightened tensions between Iran and Israel and the prospect of US involvement have muddled economic forecasts, dimming hopes for more supportive monetary policy.
Brent crude oil climbed by 4% to over $75 per barrel on Tuesday, marking its first rise since mid-February, according to Trade Economics data.
In a recent email, Alice Liu from Coinmarketcap mentioned that investors will be closely observing Powell’s indications on whether the Fed’s monetary policy will become more hawkish or less restrictive.
If Powell signals concerns about inflation or hints at cuts in September, Bitcoin might test the $91,500 support level, while altcoins could perform poorly due to tight liquidity. Conversely, a surprise dovish stance could lead to positive momentum in the crypto space, possibly pushing Bitcoin up to $110,000.
Nigel Green, CEO of a financial advisory firm, commented that the Fed is not yet seeing the strong disinflation trends required to justify immediate cuts, although data is trending positively.
Update (June 18, 2025, 3:30 PM): Added comments from Liu and Powell.
