The current decline in the crypto market, with Bitcoin reaching $42,000, can be attributed to the U.S. Federal Reserve’s stance on interest rate hikes. The crypto market has experienced a significant shift due to the Federal Reserve’s decisions, impacting investor sentiment and market dynamics.
In December 2023, Bitcoin crossed the $31,000 mark, and since then, the market has been on an upward trend, influenced by macroeconomic factors, especially the approval of Bitcoin ETFs by the US SEC.
Crypto markets take a hit at the start of Feb 2024
At the time of writing, Bitcoin (BTC) is worth $42,162.02, down 0.1% from an hour ago and 1.9% from yesterday. The value of BTC today is 5.1% higher than what it was seven days ago. In the last 24 hours, the total volume of Bitcoin transactions was $26,520,587,977.
The global crypto market cap is $1.7 trillion today, down 2.18% in the last 24 hours and 51.81% a year ago. As of today, Bitcoin has a market cap of $827 billion, reflecting a 48.78% crypto market dominance. Meanwhile, stablecoins’ market capitalization is $137 billion, accounting for 8.07% of the overall crypto market capitalization.
Bitcoin fell on Jan. 31 as the US Federal Reserve opted to keep interest rates constant and dampened chances of a rate drop in March, prompting one analyst to anticipate doom for US markets and BTC.
During the Federal Open Market Committee (FOMC) press conference on January 31, the Fed stated that interest rates would remain at 5.25%-5.50%, adding that it would require “greater confidence” that inflation pressures had been addressed before decreasing rates.
“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent,” the Federal Reserve said in a statement.
The Fed noted that recent statistics indicated to a “solid” economic expansion, citing ongoing job growth and a lower unemployment rate as signs of strength.
Fed meeting data
In a broad endorsement of the strength of the US economy, Federal Reserve Chair Jerome Powell indicated on Wednesday that interest rates had peaked and would decline in the coming months, with inflation remaining low and job and economic growth expected to continue.
Powell, speaking after a two-day policy meeting, declined to declare victory in the US central bank’s two-year inflation fight, vouch for a desired “soft landing” for the economy, or promise rate cuts as soon as the Fed’s March 19-20 meeting, as investors had hoped in the run-up to this week’s policy decision.
But in almost every other way during a 48-minute session with reporters, Powell delivered an unhedged round of good news about the status of an aggressive war on inflation, which many economists predicted would tip the US into recession and put millions out of work with the highest and fastest rate hikes in nearly four decades.
Powell stated that rate cuts would occur once the Fed is more confident that inflation will continue to fall from a level it still considers “elevated,” at least on a one-year basis, with the personal consumption expenditures price index, a key measure used by policymakers, at 2.6% on an annual basis as of December.
Inflation is already below 2% on a seven-month period, and the Fed has guaranteed that rate decreases will begin before the one-year rate meets the target.
After Powell all but ruled out a cut at the March meeting, speculators in Fed-related contracts set May 1 as the date the central bank will begin lowering the rate from the level it has held since last July.
While Powell’s remarks paint a positive economic picture in a presidential election year that could rely significantly on public views towards inflation and wages, they were a short-term setback for investors who had expected rate reduction to begin as early as seven weeks from now.
Following Powell’s speech, US stocks plummeted and closed substantially lower on the day, while the dollar (.DXY) climbed versus a basket of currencies. US Treasury yields also fell.
