The price of Bitcoin remained largely stable this Wednesday (20) after the Federal Reserve (Fed) did what many analysts expected and left interest rates unchanged.
The largest cryptocurrency by market value has maintained its value at around US$27,000 although bears have been pushing for BTC to return to US$26,000.
“Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have slowed in recent months but remain strong, and the unemployment rate has remained low. Inflation remains elevated,” the Federal Reserve said in a statement following the Federal Reserve Open Market Committee meeting
The Fed also highlighted that the US banking system is solid and resilient. Additionally, it said tighter credit conditions for households and businesses will likely weigh on economic activity, hiring and inflation.
Ruslan Lienkha, head of Markets at YouHodler, believes that the rate pause is unlikely to stimulate bullish sentiment for risk assets and, as a result, Bitcoin is unlikely to rise exponentially, according to him.
“Even at the same rate until the end of 2023, fixed bond yields will continue to grow, which will exacerbate the situation for risky assets,” he said.
Lienkha added that the current rate of 5.5% is not yet fully priced in and that the current rate will affect markets for at least a few months.
Bitcoin Price and Fed Announcement
Analysts are optimistic that the Federal Reserve will maintain its key rate in the 5.25%-5.50% range through the end of the year.
“There will be about 75 basis points of interest rate cuts in 2024 as the Fed becomes increasingly dovish,” said James Butterfill, Head of Research at CoinShares.
According to David Wells, CEO of Enclave Markets, claims that the rate hike cycle may be coming to an end are a positive sign for markets, but it will take time for this to positively affect the price of cryptocurrencies.
Butterfill of CoinShares said the effects of high interest rates will increasingly weigh on the economy in the coming months. He added that this will make it more difficult for the Fed to maintain a hawkish monetary stance.
“Looking a little further ahead, as high interest rates begin to increasingly weigh on the economy, the prospects for further rate hikes will diminish, which will likely support Bitcoin,” he concluded.