01/30 update below. This post was originally published on January 29
Bitcoin and crypto prices have stabilized after teetering on the edge of another tumble yesterday, with traders still reeling from a sudden sell-off that sparked fears of a “financial crisis.”
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The bitcoin price dropped sharply toward $100,000 before bouncing back to around $102,000 though bitcoin and crypto remain subdued despite BlackRock chief executive Larry Fink revealing a sovereign wealth fund bombshell.
Now, as Coinbase’s chief executive predicts when the bitcoin price could flip gold’s $18 trillion, bitcoin and crypto traders are braced for the Federal Reserve’s latest interest rate decision after U.S. president Donald Trump called for rates to come down sharply.
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U.S. president Donald Trump has called for Federal Reserve chair to lower interest rates by “a … [+]
The market is pricing in a near-100% certainty that the Fed’s rate-setting Federal Open Market Committee (FOMC) will keep interest rates on hold, according to the CME Group FedWatch Tool, after cutting rates at each of its last three meetings.
“The current [bitcoin price] lull can be attributed to risk aversion ahead of the Fed meeting,” Alex Kuptsikevich, the FxPro chief market analyst, said in an emailed note.
01/30 update: The bitcoin price and wider crypto market have climbed after the Federal Reserve followed through with its well-telegraphed pause of interest rate cuts yesterday, with the bitcoin price topping $105,000.
Fed chair Jerome Powell’s dovish comments that indicated he expects inflation to continue to ease helped push bitcoin and crypto prices higher.
“Even with the U.S. Federal Reserve pursuing a ‘wait and see’ strategy on further interest rate cuts, bitcoin bulls have little reason to worry,” Neil Roarty, cryptocurrency analyst at ClickOut Media, said in emailed comments.
“The current 4.25% to 4.5% range is already proving low enough to sustain risk appetite, even if inflation is still higher than the Fed’s target. Bitcoin looks safe above the $100,000 watermark, and it could break higher over the coming months if Donald Trump pressures Jerome Powell into accelerating cuts, as he’s hinted he may. While bitcoin remains an attractive risk-on asset at current rates, a drop below 3% could flood markets with liquidity, further fueling speculation and pushing bitcoin into uncharted territory.”
Powell also opened the door for banks to start serving crypto companies, provided they take proper precautions. “Banks are perfectly able to serve crypto customers as long as they can understand and service the risks,” Powell said at a press conference following the Fed’s rate decision.
Meanwhile, U.S. president Donald Trump criticized the Fed and Powell, accusing them of failing to get a handle on inflation and the economy and putting pressure on Powell to bring interest rates down through 2025.
“Because Jay Powell and the Fed failed to stop the problem they created with inflation, I will do it by unleashing American energy production, slashing regulation, rebalancing international trade, and reigniting American manufacturing, but I will do much more than stopping inflation, I will make our country financially, and otherwise, powerful again,” Trump posted to his Truth Social account.
“The Fed has done a terrible job on bank regulation. Treasury is going to lead the effort to cut unnecessary regulation, and will unleash lending for all American people and businesses. If the Fed had spent less time on DEI, gender ideology, ‘green’ energy, and fake climate change, inflation would never have been a problem. Instead, we suffered from the worst inflation in the history of our country.”
The rate decision will be released Wednesday at 2pm ET, followed by the all-important press conference led by Fed chair Jerome Powell in which reporters will press him for a reaction to Trump’s comments that interest rates should come down by “a lot.”
“I think I know interest rates much better than they do, and I think I know them certainly much better than the one who’s primarily in charge of making that decision,” Trump said last week.
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The bitcoin price has surged over the last year, helped by the Federal Reserve beginning its … [+]
Last year, then-Republican candidate Trump said U.S. presidents should have a say over decisions made by the Fed, raising the possibility it could lose its independence.
“We expect [Fed chair Powell] to be as diplomatic as is possible, while firmly committing to Fed independence,” Ajay Rajadhyaksha, an economist at Barclays, wrote in a note seen by Axios.
“Now that Trump has been calling quite vocally for lower interest rates, if the Fed eases monetary policy it will create the impression that they caved to him and forfeited their independence,” Isabella Weber, economist at the University of Massachusetts Amherst, told the Financial Times.
