Why Fixed FOMC Interest Rates Fuel Bitcoin Bull Rally

Bitcoin has set its sights on $40,000, buoyed by the recent Federal Open Market Committee (FOMC) decision to keep interest rates on hold. The market's pulse quickened as the Federal Reserve strengthened its strategy to keep the federal funds rate in the 5.25%-5.50% corridor.

This move, although expected, has sent ripples through the financial markets, encouraging investors and traders in the crypto industry.

Bitcoin jumps as Fed extends pause on interest rates

The equilibrium in interest rates has provided fertile ground for Bitcoin to regain its momentum. According to BeinCrypto's chain analyst Ibrahim Ajibade, this could help Bitcoin rise to $40,000 with confidence.

“With around 79% of Bitcoin holders in profitable positions, the overall sentiment in the ecosystem is primarily positive… Drawing estimates from these historical data trends, the expected bullish pause could take Bitcoin's price to $40,000 if officially announced,” Ajibade said.

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This resurgence isn't just an isolated ride for Bitcoin. The altcoin sector is also experiencing a renaissance, with Solana (SOL) leading the charge, recording an impressive 16% increase. Similarly, Avalanche (AVAX), Polkadot (DOT) and Protocol Near (NEAR) rose between 6% and 10%.

The Federal Reserve's stance, coupled with Fed Chairman Jerome Powell's assertion that the balance sheet decline will continue unchanged, has created cautious optimism. Still, as the Fed extended its pause on interest rate hikes, the crypto market responded well, as expected by Ajibade.

The FOMC's firm commitment to fighting inflation has reassured markets by maintaining high employment. The Fed's ability to manage inflation risk and proactively adjust monetary policy is critical to maintaining market confidence.

“The US banking system is healthy and strong. Tighter financial and credit conditions for households and businesses can weigh on economic activity, employment and inflation. The magnitude of these effects is uncertain. The Committee pays close attention to inflationary concerns,” the FOMC statement read.

As stocks closed higher with the S&P 500 and Nasdaq 100 both posting significant gains, the cryptocurrency market also settled into a favorable economic position. The yield on the 10-year US Treasury rose to 4.73% from 5% earlier in the week. Further strengthening Bitcoin's appeal as a hedge against loose monetary policies.

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With the Fed's hands on monetary regulators and economic indicators closely monitored, the market looks forward to a period of stability and growth. This scenario sets the stage for Bitcoin to pursue new annual highs, with the $40,000 target in the crosshairs.