Bitcoin News: Implications Of Federal Reserve Turning Hawkish

The U.S Federal Reserve has left the interest rate unchanged, citing the risk of possible worsening inflation.

This is according to the meeting minutes held between January 28 and 29 that recently became public.

The meeting minutes showed that the officials have decided to monitor progress on inflation before proceeding with further rate cuts.

Bitcoin News: Fed Maintains Hawkish Stance on Interest Rates

In an update shared on X, ecoinometrics, an analytical platform, noted that the Federal Reserve is becoming more hawkish on interest rates.

The Fed has decided to prioritize controlling inflation by keeping the high interest rate for longer than market participants anticipated.

The recent stance directly contrasts the Fed’s position in December 2024, when their tone favored a rate cut.

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However, given that inflation is not decreasing in the broader financial market, the Feds appear unwilling to lower rates.

In their view, lowering interest rates at this time might seem premature, given that the labor market is still strong.

Analysts pointed out that the signal from the labor market does not place any sense of urgency for a rate cut.

Usually, implementing a rate cut would have been necessary if the labor market were weak and there was a need to stimulate job growth.

They insist that the Fed’s policy aligns with the current economic trends and independent monetary policy analysis.

Potential Impact on Bitcoin and Crypto Markets

With the Fed likely heading towards a longer pause in rate cuts, crypto stakeholders are considering the impact it could have on the sector.

Notably, the Fed’s decision to maintain a higher interest rate means that safe assets like the U.S. Treasury bonds will remain attractive.

Investors might choose to embrace such assets as they offer higher yields with limited risk. Hence, they might shift away from volatile assets like cryptocurrencies.

Conversely, Bitcoin and other riskier assets like tech stocks could gain less attention from investors who prefer guarantees on their funds.

This might trigger a downward pressure on the prices of risk assets like Bitcoin. As observed by ecoinometrics, “This could negatively impact Bitcoin.”

Experts pointed to historical data that shows the hawkish policies of the Fed have always resulted in a decline in Bitcoin’s price.

For instance, between 2021 and 2022, amid rate hikes, Bitcoin crashed in value from around $60,000 to $30,000.

Based on historical antecedents, analysts argue that a prolonged delay in rate cuts or an increased rate hike could lead to a Bitcoin sell-off.

Bitcoin could face renewed downward pressure that might ignite price drops in the short term.

Meanwhile, given the correlation of other cryptocurrencies with Bitcoin, they could face similar pressures. Such a scenario could impact the entire crypto market negatively.

Bitcoin’s Price Outlook Amid Fed Uncertainty

Market watchers predict that if the hawkish stance lingers, it could dampen Bitcoin demand from institutional and retail investors.

If demand drops, the price could follow in the same direction as the urge to flock to Bitcoin as “a hedge against inflation” fades.

Additionally, if the Fed maintains a rate between 4.25% and 4.50%, Bitcoin might show resistance at $95,000 and support at $85,000 based on recent market trends.

However, if inflation suddenly drops, Bitcoin could rise and breach the psychological $100,000 level.

Some optimists have predicted a price range between $102,800 and $110,000.

As of this writing, Bitcoin is being swapped at $98,834.22, representing a 1.37% increase in the last 24 hours.