Bitcoin price stumbles after Fed dashes hopes for rate cuts in March

Bitcoin ( BTC ) stumbled on Wednesday after the United States Federal Reserve decided to leave interest rates unchanged, hosing down hopes for a potential rate cut in March.

During the Federal Open markets Committee press conference on Jan. 31, the Fed Reserve Board said interest rates would stay at 5.25%-5.50% adding that it would need to have “greater confidence” that inflation pressures had been dealt with before cutting rates.

The price of Bitcoin fell a little over 2.2% following the FOMC announcement and is currently changing hands for $42,590 — though it is still up 7% for the week, per TradingView data.

“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,” it said in a statement.

The Federal Open Market Committee (FOMC) wrote that recent indicators pointed to “solid” economic expansion, listing continued growth in jobs and a reduction in the unemployment rate as evidence of strength.

However, the Fed reiterated its hawkishness, saying that while inflation had eased over the past year, it remains at a level where rate cuts are by no means a certainty.

“The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.”

Rate cuts are often considered bullish for risk assets such as cryptocurrencies and tech stocks.

When the Federal Reserve cuts rates, it makes it cheaper to borrow capital, which increases overall spending activity and risk-on behavior in the economy.

In an emailed note to Cointelegraph, IG Markets analyst Tony Sycamore wrote that Bitcoin is trading lower due to a “deterioration in risk sentiment” brought about by the Fed’s hawkishness.

Sycamore added that investors could expect a rally toward around $45,000 before returning to the mid-$30,000 region. After this, Sycamore said that he expects the general uptrend for Bitcoin to resume.