FOMC Minutes Reveal Cautious Outlook, Steady Rates, What It Means For Crypto  

The minutes of the May FOMC meeting, highly anticipated in the crypto market, have finally been released. The data pretty much reflects recent observations.

In addition, rates remain steady. However the underlying economic risks may still have an impact on risk-on assets like Bitcoin and altcoins.

One of the key highlights of the FOMC minutes was that the FED maintained a hawkish approach citing elevated economic uncertainty. Policy makers cited trade policy- induced uncertainty as a major factor for the cautious approach.

The cautious sentiment and uncertainty in the market was largely due to the tariff wars and their subsequent impact. The FED noted that one of the underlying risks of the tariff wars was the supply chain disruptions. This meant that inflation would remain elevated contrary to expectations.

As a result, the FED will have to wait and evaluate the market conditions for more clarity before making a definitive move.

FED to Maintain Steady Rates Due to Inflation Risks

The markets have been hoping for a rate cut after it failed to do so as revealed when the previous FOMC meeting minutes were released in April.

However, with the economic disruption that occurred in the last 2 months, the expectation was that rates would remain unchanged.

Sure enough, the minutes of the latest FOMC meeting revealed that interest rates would hold steady between 4.25% and 4.50%.

This was arguably a favorable outcome for the markets. That is considering the heightened economic pressures which could have easily forced the FED to raise rates.

Interest rates have historically had an impact on Bitcoin and the rest of the crypto market. This was because higher rates are traditionally linked to less liquidity in the market.

This usually encourages investors to move their liquidity to risk-off assets. On the other hand, lower rates often pave the way for more liquidity flows in favor of risk-on assets like cryptocurrencies.

It was worth noting that the FED’s hawkish stance meant that the risk had not yet passed, as inflation concerns remained high.

Among the key reasons included the crypto market volatility caused by global trade disruptions and the depreciating dollar. Slow economic data and weak employment data were added to the mix, collectively highlighting the prevailing danger which could even necessitate raising rates at some point.

Nevertheless, the overall expectation is that the FED might lower rates in September and December.

What Does it All Mean for Crypto – Bitcoin and Altcoin Holders?

The first direct observation was that the steady rates meant that the crypto market was once again safe from potential short term turmoil. However, it also missed out on the potential wave of liquidity that would have been triggered if the FED were to lower rates.

However, there is one aspect that might be overlooked as far as crypto is concerned. As the recent economic pressures weight in heavily on the dollar, investors may move their funds to safe haven assets.

Bitcoin and altcoins might win in that regard, depending on the state of market conditions in the coming weeks or months. We observed Bitcoin decouple from its correlation with the S&P500 on multiple occasions recently. It was worth noting as it rallied even as stocks crashed.

The explanation behind the decoupling was that investors were treating the cryptocurrency as a safe haven. This was because BTC did not have direct exposure to the economic impacts and fallout triggered by the tariff wars.

Cryptocurrencies could thus continue to enjoy the safe haven status if the economic pressures continue to unwind. An uncorrelated asset class would be quite appealing especially during times of economic distress.