The Federal Reserve decided to keep its benchmark interest rate steady at 4.25%-4.50% on Wednesday. This is what they call a ‘hawkish pause.’ Inflation is still high, and the economy is growing steadily.
This decision comes after three rate cuts in late 2024. It shows that policymakers are being careful about rushing into any monetary easing.
So, what does this mean for the market? Well, there weren’t any big changes right after the announcement. Typically, steady rates can be seen as bad news for the crypto market. It suggests that money won’t flow into high-risk assets as quickly.
However, some major cryptocurrencies did see a slight boost. Bitcoin, Solana, and XRP each climbed nearly 2% within an hour of the news. This hints at some market optimism regarding liquidity stability.
A pause in rate hikes often looks good for riskier assets like cryptocurrencies. When interest rates are low or expected to stay stable, traditional fixed-income investments lose their appeal. Investors tend to shift toward higher-yielding options like stocks and crypto.
As Mario Nawfal pointed out on X (formerly Twitter), “Trump’s out here begging for a cut, but the Fed’s like ‘nah.’ It’s bad news for crypto, because when interest rates stay high, investors chill out and avoid risk. But if Powell changes his tune and gets more dovish, we could see some action.”
Additionally, this ‘hawkish pause’ suggests that economic conditions are stable enough to avoid aggressive tightening. This creates a favorable atmosphere for crypto markets, which thrive on liquidity and investor confidence.
Even though they kept rates steady, the Fed noted that inflation is still elevated. They also removed earlier references to progress toward their 2% goal. This implies further rate cuts might not be coming soon.
Still, strong employment levels and a resilient economy help ease recession fears. This supports speculative assets like Bitcoin and other cryptocurrencies.
President Trump had called for more rate cuts, but the Fed chose to stick with its current approach. The crypto market will be watching closely for any signs of future liquidity expansion. Until the Fed shifts toward cuts or takes steps to boost monetary stimulus, altcoins are likely to lag behind Bitcoin.
Bitcoin remains a safer bet in a hawkish monetary environment. Its stronger institutional appeal and macro resilience make it a more attractive option.