Bitcoin experienced a decline, dropping below $43,000, as Federal Reserve Chair Jerome Powell’s cautious remarks tempered expectations of an upcoming rate cut in March.
Following the Federal Open Market Committee meeting, where the Fed opted to maintain the fed funds rate range at 5.25%-5.5%, market attention turned to clues regarding potential rate adjustments, with many anticipating a decrease in March. However, Powell’s statement during the post-meeting press conference suggested otherwise, causing a swift downturn in risk assets, including cryptocurrencies.
Powell gives a hard shove *against* a March cut:
“I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to [cut], but that’s to be seen.”
— Nick Timiraos (@NickTimiraos) January 31, 2024
Bitcoin’s value fell to $42,300 from its peak of $43,700 within 24 hours, marking a 2.3% decrease. The broader cryptocurrency market, as measured by the CoinDesk 20 index, also experienced a nearly 3% decline. Other prominent cryptocurrencies like ether, Cardano’s ADA, Avalanche’s AVAX, and Polkadot’s DOT saw drops ranging from 3% to 4%, with Solana’s SOL plummeting over 6% below $100.
In traditional markets, the Nasdaq dropped 2.2%, and the S&P 500 declined 1.6%. Analysts such as Alex Krüger suggested that the market may have prematurely priced in rate cuts, projecting cuts to begin in May or June rather than March. Consequently, the likelihood of a March rate cut decreased to 34.5% from around 65% before Powell’s remarks, according to the CME FedWatch Tool.
Ruslan Lienkha, chief of markets at Web3 fintech platform YouHodler, warned that any hawkish statements hinting at prolonged high rates could trigger corrections in the stock market and prompt capital outflow from risk assets like bitcoin. Nevertheless, analysts at Swissblock noted that bitcoin’s downward movement may be limited, as the cryptocurrency appears to be consolidating between $44,000 and $42,000 with no clear trend. They identified the $42,000 level and below $40,000 as crucial support levels where buyers might intervene.