- The Federal Reserve decided to maintain interest rates at 4.25%–4.50% following its March meeting.
- The cryptocurrency market began to recover after this announcement, with its market capitalization bouncing back to $2.9 trillion.
- This upward trend is fueled by speculation that the Fed might soon contemplate rate reductions after updating its GDP projections.
The cryptocurrency market experienced gains on Wednesday after the Federal Reserve opted to keep interest rates steady between 4.25% and 4.50%. Expectations remain strong for two 50 basis point rate decreases in 2025.
Crypto market surges as Fed holds interest rates steady
The Federal Reserve maintained the current interest rate range of 4.25%–4.50% for the second time in a row.
The committee also announced that it would decelerate its quantitative tightening (QT) effort, citing that several members still anticipate a 50 basis-point cut in 2025.
“Fed projections indicate 50 bps of rate cuts in 2025, with an additional 50 bps in 2026,” analysts noted.
During a press briefing that followed the meeting, the Fed Chair remarked that officials are not in a rush to lower rates and will keep a close eye on economic developments.
He highlighted that tariffs, which have formed a significant part of the recent trade disputes, have raised recession fears in the American economy, contributing to heightened economic uncertainty.
The central bank also adjusted its GDP growth forecast down to 1.7% from the earlier prediction of 2.1% made in December.
At a recent digital asset summit, it was suggested that policymakers may need to reconsider their rationale for rate reductions.
Initially, potential cuts were framed as a reaction to falling inflation, indicating a stable economy. However, with economic growth slowing, the rationale may shift to cutting rates to stave off a downturn, reflecting concerns about the economy rather than its stability.
If the economy edges closer to a recession, the Fed may find itself leaning towards interest rate cuts.
This anticipation led to a recovery in the cryptocurrency market ahead of the Fed meeting, propelling its market cap back up to $2.9 trillion.
Many prominent altcoins also surged, with Bitcoin surpassing $85K for the first time since tariffs were imposed on March 4. Ethereum, Solana, and XRP experienced increases of 5%, 7%, and 10%, respectively.
Another potential catalyst for the rise in cryptocurrencies could be President Trump’s upcoming appearance at the digital asset summit, where he is expected to reveal significant updates regarding his cryptocurrency policy.
The increase in cryptocurrency prices may also be linked to a correlation with the stock market, which noted slight gains after the Fed’s announcement.
The S&P 500 surged by over 60 points, resulting in a 1% increase on Wednesday. Other equity indices, including the Nasdaq, also rose by more than 1%.
“Cryptocurrency markets are likely to closely track the S&P 500 in the foreseeable future, although individual altcoins may continue to exhibit greater unpredictability and volatility,” indicated an intelligence firm on social media.