The US Federal Reserve (Fed) has chosen to keep interest rates unchanged, keeping them between 3.5% – 3.75%, while insisting that inflation remains relatively high.
The decision was widely expected by investors, but two Fed officials still want rates cut by 0.25%, indicating that there are differences of opinion among policymakers.
Despite the Fed’s caution, the USD continues to weaken, falling to a four-year low against other major currencies.
President Trump is seen as comfortable with a weak USD, as it can help exports and boost economic growth, while some analysts believe the market may be getting an indirect rate cut through USD weakness.
Bitcoin is currently around $88,000, while the crypto market as a whole is still volatile after a major drop in October last year.
Historically, digital assets like Bitcoin tend to rise when monetary policy is loose, but analysts emphasize that the dollar’s trajectory may be more important than interest rates.
A strong USD often puts pressure on risk assets, while a weak USD usually paves the way for crypto and stocks to rise.
Analysts from the OSL platform in Hong Kong point to the inverse relationship between Bitcoin and the Dollar Index, as when the USD falls, investor interest in crypto increases.
This means that even if the Fed does not cut rates, Bitcoin and crypto could continue to gain momentum if the USD continues to weaken.
The Fed’s chances of making an official rate cut are diminishing as inflation remains high and economic growth is better than expected.
The market is now expecting a rate cut chance of less than 50% in the next two Fed meetings.
However, crypto investors are still closely watching the USD’s movements and the Fed’s decision, as both could be the main drivers of the crypto market in the short term.
