Bitcoin’s price experienced minimal change following the U.S. central bank’s decision to raise interest rates by 25 basis points, which brings the Federal funds rate to a target range of 5 to 5.25%. Currently trading at around $28,460, Bitcoin’s value decreased slightly after the Fed’s interest rate hike. This marks the 10th rate increase in 14 months, and the Federal Open Market Committee (FOMC) has acknowledged that “tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation,” promising to keep a close eye on inflation risks.
Despite inflationary pressures remaining high and the lengthy process to bring it down to 2%, Fed Chair Jerome Powell said that the decision on the rate hike pause “was not made today.” Additionally, the Fed did not signal further rate hikes in their statement, as previous statements had. Powell stated that the assessment of whether additional policy firming is appropriate will be continually assessed at future meetings. He also mentioned the possibility of a mild recession.
Over 93% of traders currently believe that the Fed will pause its rate hikes at the June policy meeting, according to the CME FedWatch Tool. Ether’s (ETH) price has also increased, currently standing at around $1,878.
Michael Safai, managing partner of crypto trading firm Dexterity Capital, believes the Fed’s latest decision will have “mixed outcomes” for crypto traders, as inflation data is improving but not enough to excite them. Consequently, Bitcoin and Ethereum are likely to remain range-bound until there is more clarity on inflation’s direction. Safai predicts that the markets might experience a slow summer if the economic recovery follows a measured pace.
Greg Magadini, director of derivatives at crypto analytics firm Amberdata, sees two Consumer Price Index (CPI) inflation readings before the Fed’s mid-June meeting. Since Bitcoin has been driven by macro events this year, and Wednesday’s rate hike was priced in already, the possibility of another hike remains on the table. The S&P 500 closed down 0.7%, Dow Jones Industrial Average was down 0.8%, and the tech-heavy Nasdaq Composite decreased by 0.4%.
Crypto investors continue to grapple with understanding the impact of recent bank failures and crypto regulatory feuding on markets. Bitcoin is unlikely to rally above $30,000 until the U.S. gains some regulatory clarity, according to Edward Moya, senior market analyst at Oanda.
Liquidity conditions for BTC and ETH are approaching one-year lows, as shown by Kaiko’s chart, a situation partially attributed to “greater macro and regulatory uncertainty,” according to Dessislava Ianeva, research analyst at Kaiko. This situation might persist as market makers remain cautious and adjust their risk management strategies, but liquidity may return as newer areas of the digital asset space grow and develop. Until then, Bitcoin will likely keep tracking broader markets.