Bitcoin Defies: Reclaims $98K as Fed Holds Rates Steady Despite Trump Pressure

The cryptocurrency world watched closely as the Federal Reserve announced its latest decision on interest rates. Despite external pressure, the Fed opted to keep rates unchanged, a move that initially caused a wobble in the Bitcoin price before it quickly bounced back, reclaiming the $98,000 level.

Understanding the Fed’s Decision on Fed Interest Rates

The US Federal Reserve’s rate-setting committee decided to maintain the target range for the federal funds rate at 4.25% to 4.50%. This decision came after careful consideration of various economic factors.

• **Economic Risks:** Fed Chair Jerome Powell highlighted concerns over rising unemployment risks and persistent inflation as key reasons for holding rates steady.
• **Inflation Status:** While inflation has decreased significantly from its peak, it remains above the Fed’s long-term target of 2%.
• **Economic Sentiment:** Surveys indicated a notable decline in business and household sentiment, partly attributed to uncertainties surrounding trade policy.
• **Market Expectations:** Data from tools like CME Group’s FedWatch indicated that the futures market had already priced in a low probability of a rate cut at this meeting.

Powell reiterated that despite these challenges, the overall economy remains in a solid position, with the labor market still considered strong.

Trump Fed Pressure and Political Context

The Fed’s decision to keep rates unchanged occurred amidst public pressure from US President Donald Trump. Just weeks prior, President Trump had openly criticized the Fed and Chair Jerome Powell, even suggesting he might fire Powell for being too slow to cut rates. The Fed, however, maintained its independent stance, making its decision based on economic data rather than political demands.

The Crypto Market Reacts: Bitcoin’s Volatility and Recovery

Immediately following Powell’s announcement, Bitcoin experienced a brief downturn, dipping below $97,000 to a low of $95,866. However, this dip was short-lived. Within hours on May 7, Bitcoin saw a strong recovery, surging back to touch $98,000 for the first time since late February.

This quick bounce reflects underlying positive momentum building in the crypto market. Recent indicators supporting this include:

• **Market Sentiment:** The Crypto Fear & Greed Index has moved back into the “Greed” territory, suggesting increased optimism among investors.
• **ETF Inflows:** Spot Bitcoin exchange-traded funds (ETFs) have continued to see significant inflows, totaling almost $4.41 billion since late March, indicating sustained institutional and retail interest.

Future Outlook and Potential Risks for Bitcoin

While the recent price action is positive, some analysts maintain a cautious outlook. Network economist Timothy Peterson previously warned that if the Fed delays rate cuts into 2025, it could potentially trigger a broader market downturn, which might pull Bitcoin back towards the $70,000 range. This perspective aligns with earlier statements from Jerome Powell in March, where he indicated that the Fed was not in a hurry to cut Fed interest rates and preferred to wait for greater clarity on economic conditions.

Summary: Navigating Economic Currents

The Federal Reserve’s decision to hold Fed interest rates steady, despite political pressure, underscores its focus on managing inflation and unemployment risks. The crypto market‘s reaction, particularly Bitcoin‘s swift recovery to $98,000 after an initial dip, highlights the asset’s current positive momentum driven by sentiment and ETF inflows. However, the path forward remains subject to macroeconomic factors and potential future shifts in monetary policy, which could still influence Bitcoin‘s trajectory.

This article provides information and does not contain investment advice. Readers should conduct their own research.