- The Federal Reserve kept interest rates unchanged at 4.25%-4.50% in its March 2025 meeting.
- Bitcoin and the broader crypto market reacted positively to the decision.
- Historical data shows a strong correlation between Fed policy changes and crypto price movements.
The Federal Reserve decided to keep interest rates steady at 4.25%-4.50% during its Federal Open Market Committee (FOMC) March 19 meeting. This move signals that the central bank is taking a wait-and-see approach as concerns about inflation persist.
In a commentary on the FOMC decision, Santiment confirmed that Bitcoin and the wider cryptocurrency market responded favorably to this policy decision. Bitcoin, in particular, saw a significant price increase.
As of yesterday, Bitcoin’s price spiked to as high as $87,443 from around $82K. Meanwhile, as of press time, Bitcoin is trading at $85,814, reflecting a 3.2% rise in the past day.
This upward movement comes as no surprise, given that traders had largely anticipated the Fed to hold rates steady. Despite the positive short-term response, some analysts caution that the long-term impact of the Fed’s monetary policies on cryptocurrencies remains uncertain.
What’s the Link Between Fed Policy and Crypto Markets?
The relationship between the Federal Reserve’s monetary policy and cryptocurrency markets has been well documented over the past years.
In 2024, the Fed raised interest rates several times to combat rising inflation, leading to considerable volatility in crypto markets.
Related: Bitcoin Bulls Look To Extreme Fear as Potential Launchpad in Fed Uncertainty
How Did Bitcoin React to Fed Decisions in 2024?
For instance, in March 2024, the Fed kept rates at 5.25%-5.50%, and Bitcoin initially reacted positively. BTC reached an all-time high above $72,000 before prices sharply dropped in April.
May 2024 saw the Fed maintain its stance. However, crypto traders were cautious, avoiding the overzealous buying that had occurred earlier in the year. As a result, Bitcoin and other digital assets bounced back.
However, during the summer of 2024, as inflation showed signs of leveling off, the Fed held steady rates in June and July. Despite these measures, the price of Bitcoin and altcoins continued to decline.
In September 2024, the Fed finally lowered rates by 0.25%, triggering a bull market that saw Bitcoin surge by 10% within just a few days.
Related: ETH Above $2K: Fed Stays Put, Altcoin Season Watch Begins
This upward momentum continued throughout the fall, especially after the November 2024 U.S. presidential election, which brought a pro-crypto candidate into office. Bitcoin and altcoins experienced substantial gains, culminating in a new all-time high for Bitcoin.
What’s the Fed’s Inflation Outlook for 2025?
Earlier this year, the Fed’s decision to keep interest rates steady at 4.75%-5.00% in January had a cooling effect on crypto markets. In particular, prices retraced. Despite this, the March decision to maintain rates at 4.25%-4.50% has been more positively received, with crypto prices experiencing slight upticks.
The Fed’s latest inflation forecast for 2025 projects inflation at 2.7%, slightly above its earlier target of 2.5%. This suggests that the central bank remains vigilant in monitoring inflation but may adjust policies if inflation continues to deviate from target levels.
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