Introduction to Bitcoin’s Recent Surge
Bitcoin has reclaimed $98,000 for the first time in almost three months after the US Federal Reserve announced it would keep interest rates the same for another month. This decision comes despite mounting pressure from US President Donald Trump, who had threatened to fire Fed chair Jerome Powell for being “too late” in cutting rates.
The Fed’s Decision Explained
The Federal Reserve rate-setting committee held rates in the 4.25% to 4.50% range due to rising risks of higher unemployment and higher inflation. Powell stated that inflation has “come down a great deal but has been running above our 2% longer objective.” Surveys in households and businesses showed a “sharp decline in sentiment” mainly due to concerns over Trump’s trade policy. However, Powell noted that “despite heightened uncertainty, the economy is still in a solid position.”
Factors Influencing the Decision
In the days leading up to the announcement, data from CME Group’s FedWatch Tool indicated that the futures market expected minimal odds of a rate cut. Powell also mentioned that the unemployment rate remains low, and the labor market is “at or near maximum employment.” The market expects the Fed to drop the Fed funds rate to 3.6% by the end of 2025.
Impact on Bitcoin
Bitcoin fell below $96,000 before retracing back above $98,000 just hours later on May 7. Initially, Bitcoin dropped below $97,000 to $95,866 after Powell’s speech, but it shot up to tap $98,000 for the first time since Feb. 21 just hours later. Bitcoin momentum has been building, with the Crypto Fear & Greed Index returning to “Greed” territory, and spot Bitcoin exchange-traded funds (ETFs) posting inflows of almost $4.41 billion since March 26.
Expert Predictions and Market Trends
On March 9, network economist Timothy Peterson warned that if the Fed holds off on rate cuts in 2025, it may cause a broader market downturn, potentially dragging Bitcoin back toward $70,000. Peterson’s forecast came after Powell said in March that “we do not need to be in a hurry and are well-positioned to wait for greater clarity.” The current trend indicates a positive outlook for Bitcoin, with some experts predicting a significant increase in value.
Conclusion
In conclusion, the recent surge in Bitcoin’s value can be attributed to the US Federal Reserve’s decision to maintain interest rates. As the market continues to react to this news, it is essential for investors to stay informed and conduct their own research before making any decisions. With the Crypto Fear & Greed Index returning to “Greed” territory and spot Bitcoin ETFs posting significant inflows, the future of Bitcoin looks promising. However, it is crucial to remember that every investment and trading move involves risk, and readers should exercise caution when making decisions.
