Bitcoin soared above $94,000, then quickly retreated as Fed Chairman Jerome Powell appeared both dovish and hawkish after the central bank announced a 25 basis point rate cut on Wednesday.
Hovering around $92,000 for most of the day, BTC surged to $94,400 as Powell – during his post-meeting press conference – highlighted the risks of a perhaps weaker-than-expected labor market, before giving back most of the gains after saying the battle against too-high inflation is far from over.
Recently, BTC changed hands at $93,500, up 0.5% in the last 24 hours. Ether extended its recent streak of relative strength, trading above $3,400 and rising about 2.4% during the same period.
Fed policy, Powell said at his post-meeting news conference, is now “within a range of plausible estimates of neutral, and leaves us well-positioned to determine the magnitude and timing of further adjustments.”
“We are well placed to wait and see [about further rate cuts]”, he added.
Powell acknowledged that there will be “a lot of data” before the Fed’s next meeting in January that will influence how the central bank moves forward.
Alongside the Fed’s earlier decision to narrow its federal funds rate range by 25 basis points, the New York Fed said it would begin buying short-term Treasury bills and Treasury securities with up to 3 years remaining maturities if necessary, targeting about $40 billion in purchases over the next month starting Friday — a move aimed at easing financial conditions without signaling the start of a real cycle quantitative easing.
Powell said purchases would remain “high” for a few months.
This marks a change from the past three years when the central bank reduced its balance sheet following rapid expansion during the pandemic years.
The analyst takes
“The Fed has made clear that this reduction does not mark the start of an aggressive easing cycle, insisting that future moves will depend heavily on inflation data and the labor market,” Daniela Hathorn, senior market analyst at brokerage Capital.com, said in a note.
“While policymakers agreed on the need for modest easing amid patchy post-shutdown data and signs of slowing momentum, the updated communication emphasized caution,” she added.
“The fact that two FOMC members voted to hold rates shows that the decision was close, complicated by the lack of complete data,” said Brian Coulton, chief economist at Fitch Ratings. The relatively moderate recovery in core inflation in recent months likely convinced the committee that another cut – while keeping rates slightly above neutral – was warranted.
“It seems unlikely that rates will continue to fall at successive meetings from here. We now forecast just two more cuts by June 2026, bringing the federal funds rate to 3.25% (upper band),” he said.
“Between signaling a pause in rate cutting and the Fed resuming purchases of U.S. Treasuries, Powell is moving the needle between their two mandates,” noted David Hernandez, crypto investment specialist at 21Shares.
For Bitcoin to break out of its trading range, Hernandez said it needs further momentum to “overpower the concentrated near-term pressure” around the $94,500 resistance zone, where Wednesday’s rise hit a ceiling.
“If spot ETF inflows strengthen as expected now that the cost of capital is falling, this could become the spark that turns caution into momentum and takes Bitcoin back above the psychological barrier of $100,000,” he said.
