Bitcoin Price Declines Amid Federal Reserve’s Decision to Hold Interest Rates
Bitcoin’s price declined to $42K following an announcement by the United States Federal Reserve, to maintain interest rates at 5.25%-5.50%.
The price of decentralized cryptocurrency Bitcoin (BTC) experienced a decline on Wednesday following the announcement by the United States Federal Reserve to maintain interest rates at their existing level. The Federal Open Market Committee (FOMC) kept the benchmark federal funds rate within the current range of 5.25%-5.50%. This decision represents the initial pause in interest rates for the year 2024.
Referring to the potential rate cut, the Federal Reserve stated that “the Committee anticipates that it would not be suitable to decrease the target range until there is a higher level of confidence that inflation is steadily progressing towards 2%,” said FOMC in the written statement.
“Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have moderated since early last year but remain strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated,” according to the FOMC.
Furthermore, Federal Reserve Chairman Jerome Powell announced that the central bank is unlikely to be sufficiently assured about the trajectory of inflation by its meeting in March to warrant a reduction in interest rates. Despite this, based on the prior announcement, the potential for rate cuts remains and might be initiated at some point later in the year. The central bank’s upcoming policy decision dates are scheduled for March 20 and May 1.
Bitcoin’s Market Dynamics Shift Post Federal Reserve’s Decision
Bitcoin, the largest cryptocurrency by market capitalization, experienced a 1.8% decline, reaching $42,149 at the time of writing, indicating a reaction to the announcement. Following Bitcoin, the broader cryptocurrency market benchmark, covering approximately 90% of the total market value of digital assets, witnessed a nearly 3% decline during the same period.
Ethereum (ETH), Cardano (ADA), Avalanche (AVAX), and Polkadot (DOT) experienced drops ranging from 3% to 4%. In contrast, Solana (SOL) registered a notable loss of over 6% throughout the day, falling below the $100 threshold.
Bitcoin prices have adjusted according to the futures market expectations regarding interest rates. This suggests that Bitcoin will likely become more responsive to macroeconomic data sensitive to interest rates, such as payroll reports and the Consumer Price Index (CPI). This trend is particularly notable as the enthusiasm surrounding ETFs subsides, indicating a potential shift in the factors influencing Bitcoin’s market dynamics.
The recent decline in Bitcoin prices, triggered by the Federal Reserve decision and its evolving sensitivity to macroeconomic indicators, emphasizes a shifting landscape in the cryptocurrency market, particularly as interest rate expectations come to the forefront.
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