Cryptocurrencies, led by bitcoin (BTC), experienced a decline, dropping below $43,000, as Federal Reserve Chair Jerome Powell’s hawkish remarks tempered hopes for an imminent rate cut. The Federal Reserve decided to maintain its benchmark fed funds rate range at 5.25%-5.5% during its first Federal Open Market Committee meeting of the year. While observers anticipated clues about potential rate cuts in March, Powell suggested that it was unlikely for the committee to identify March as the time for a cut.
Market Reaction:
Following Powell’s comments, risk assets, including cryptocurrencies, saw a sharp downturn. Bitcoin fell to $42,300 from its daily high of $43,700, marking a 2.3% decrease over the past 24 hours. The CoinDesk 20 (CD20) index, representing approximately 90% of the total market value of digital assets, also declined nearly 3% during the same period.
Other major cryptocurrencies, such as ether (ETH), Cardano’s ADA, Avalanche’s AVAX, and Polkadot’s DOT, experienced declines ranging from 3% to 4%, while Solana’s SOL dropped over 6%, falling below $100.
In traditional markets, the Nasdaq tumbled 2.2%, and the S&P 500 dropped 1.6%. Analysts, such as Alex Krüger, co-founder of Asgard Markets, noted that the market had been overly optimistic about rate cuts, expecting them to commence in May or June rather than March.
Impact on Bitcoin:
The probability of a rate cut in March has decreased to 34.5%, down from around 65% before Powell’s comments, according to the CME FedWatch Tool. Ruslan Lienkha, chief of markets at Web3 fintech platform YouHodler, suggested that any hawkish rhetoric regarding a more extended period of high rates could trigger a correction in the stock market, leading to capital outflows from risk assets like bitcoin.
Despite the downturn, some analysts believe that bitcoin’s downside movement could be limited, with the cryptocurrency consolidating between $44,000 and $42,000. The $42,000 area and levels below $40,000 are identified as key support levels where buyers may intervene, according to a Swissblock market report.
This information is not legal advice. Do your own research before making any decisions. Only invest what you can afford to lose and seek independent financial advice if needed. Understand the risks involved before purchasing any cryptoassets.