The recent decision by the United States Federal Reserve (Fed) to keep interest rates unchanged has had a direct and stable impact on the Bitcoin market. On Wednesday, the price of Bitcoin showed remarkable stability. As such, it is a direct reflection of the Federal Open Market Committee’s decision to maintain the federal funds base rate between 5.25% and 5.50%. This decision marks a significant pause in the Fed’s rate adjustment policies for the year 2024.
The statement issued by the American central bank highlighted that economic activity continues to expand at a solid pace. Although there has been a moderation in job gains since the beginning of last year, they still remain strong, and the unemployment rate remains low. Thus, the statement also points out that, although inflation has decreased over the last year, it still remains at a high level.
Interesting to note is the Federal Reserve’s cautious approach to the possibility of reducing rates. Accordingly, the agency indicated that it does not consider it appropriate to reduce the target range until there is greater confidence that inflation is moving sustainably towards the 2% target.
Bitcoin shows sensitivity to changes in interest rate expectations
In the cryptocurrency market, Bitcoin, the world’s largest cryptocurrency in terms of market capitalization, registered a modest increase of 0.2% in the last 24 hours, trading at approximately US$43,462. However, this stability reflects the growing influence of macroeconomic factors on cryptocurrency, especially in relation to interest rates.
James Butterfill, head of research at CoinShares, highlighted that Bitcoin is becoming increasingly sensitive to interest rate decisions. Particularly as financial institutions increase their market share through spot bitcoin ETFs. According to him, the alignment of Bitcoin prices with future market interest rate expectations suggests an increasingly attentive response to sensitive macroeconomic data. Thus emphasizing payrolls and consumer price indices.
The Fed’s decision and the Bitcoin market’s reaction signal a period of observation and caution, for both investors and analysts. This concerns the impact of monetary policies on the cryptocurrency market.
The views and opinions expressed by the author, or anyone mentioned in this article, are for informational purposes only and do not constitute financial, investment or other advice. Investing in or trading cryptocurrencies carries a risk of financial loss.