The price of Bitcoin fell after the Fed announced a rate cut in March
Bitcoin stumbled on January 31 after the US Federal Reserve decided to leave interest rates unchanged and expressed hope for a March cut, leading one analyst to predict trouble ahead for US stocks and BTC.
During the January 31st Federal Open Market Committee (FOMC) press conference, the Fed stated that interest rates will remain at 5.25%-5.50%, saying that it needs “great confidence” that price pressures have been dealt with before cutting rates.
IG Markets analyst Tony Sycamore told Cointelegraph that the Fed's dovish sentiment could spell trouble for US stocks and risk assets like Bitcoin (BTC).
“Unless earnings from Apple, Amazon and Meta shoot the lights out tomorrow, expect a further pullback in US stocks in the coming sessions, weighing on other riskier assets, including Bitcoin,” Sycamore said.
After the FOMC announcement, the price of Bitcoin fell slightly more than 2.2% and is currently changing hands at $42,590 – although it is up 7% for the week, according to data from TradingView.
“The committee does not expect it to be appropriate to reduce the target range until it has more confidence that inflation is moving towards 2 percent in a sustainable way,” the Fed wrote in a statement.
The Fed added that recent indicators cite “strong” economic expansion, continued job growth and declining unemployment as evidence of strength.
However, the Fed reiterated its dovishness, saying that while inflation has eased in the past year, inflation remains at a level that is by no means certain.
“The economic outlook remains uncertain, and the Committee pays close attention to inflationary concerns.”
Declining prices are often considered bullish for risky assets such as cryptocurrencies and technology stocks.
When the Federal Reserve lowers rates, it makes it cheaper to borrow capital, which increases overall spending activity and risks to the economy.
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Sycamore added that bitcoin will continue to trade lower as risk sentiment worsens due to Fed hawkishness.
Sycamore said: “This morning's FOMC meeting disappointed banks who were on the Fed's March rate cut, and yesterday's earnings report from Microsoft, Alphabet and ADD. It exposes the lost streams of hatred,” Sycamore said.
Sycamore added that investors should expect a rally towards $45,000 before returning to the mid-$30,000s. After this, Sycamore said he expects Bitcoin's overall uptrend to resume.
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