Bitcoin has reclaimed the $98,000 mark for the first time in almost three months, following the US Federal Reserve’s decision to maintain interest rates steady for the time being. This pivotal announcement comes amidst significant pressure from US President Donald Trump, who has been vocal about his desire for rate cuts and even implied the possibility of dismissing Fed Chair Jerome Powell for being “too late” in his approach.
Analyzing the Federal Reserve’s Stance
In a statement made on May 7, Jerome Powell indicated that the rate-setting committee opted to keep interest rates within the range of 4.25% to 4.50%. This decision, he explained, was influenced by the growing concerns regarding potential increases in unemployment and inflation. While Powell acknowledged that inflation had decreased significantly, he also noted that it continues to exceed the Fed’s longer-term objective of 2%.
Surveys of both households and businesses revealed a marked decline in economic sentiment, largely attributed to uncertainties surrounding Trump’s trade policies. Despite these challenges, Powell asserted that the economy remains fundamentally strong. Data from the CME Group’s FedWatch Tool suggested that expectations for a rate cut in the near future were minimal.
While the Fed acknowledges current risks, they also report that the unemployment rate remains low, indicating that the labor market is “at or near maximum employment.” The prevailing market expectation indicates a potential reduction in the Fed funds rate to 3.6% by the close of 2025.
Following Powell’s comments, Bitcoin initially dipped below the $97,000 threshold to around $95,866. However, it dramatically rebounded, peaking at $98,000 for the first time since February 21. This notable surge is attributed to increasing momentum within the cryptocurrency market, as indicated by the Crypto Fear & Greed Index returning to the “Greed” territory. Moreover, spot Bitcoin exchange-traded funds (ETFs) have seen substantial inflows, amounting to nearly $4.41 billion since March 26.
Nonetheless, market analysts remain cautious. Timothy Peterson has warned that maintaining the current interest rates into 2025 could potentially lead to a broader market downturn, which may push Bitcoin back to around $70,000. This forecast follows Powell’s previous assertion that, “we do not need to be in a hurry and are well-positioned to wait for greater clarity.” As the situation evolves, investors are encouraged to remain vigilant and stay informed on market conditions.
Disclaimer: This blog post does not serve as investment advice or recommendations. All investment and trading activities carry risks, and readers should conduct thorough research before making any decisions.
