Fed Holds Rates as Dollar Weakens, Shaping Bitcoin and Crypto
The US Federal Reserve left interest rates unchanged on Wednesday, a widely expected outcome that maintains current policy settings while markets assess the outlook for monetary easing through other channels.
News
The Federal Open Market Committee held the federal funds rate at 3.5% to 3.75%, marking its first pause since July, and noted that inflation remains “somewhat elevated.”
Two policymakers dissented, voting for an additional 25-basis-point reduction.
The decision contrasts with US President Donald Trump’s repeated calls for sizable rate cuts. Some market analysts, however, said that currency moves could deliver de facto easing even without an immediate policy shift.
Following its worst annual performance since 2017, the US dollar extended losses this week, with the Bloomberg Spot Dollar Index falling to four-year lows. Asked about the currency’s slide, Trump said, “The value of the dollar is great.”
For markets commentator The Kobeissi Letter, the ongoing depreciation suggests the administration may tolerate a weaker dollar to help pull down rates and support US exports.
Source: The Kobeissi Letter
David Ingles, chief markets editor at Bloomberg TV APAC, added that “President Trump may effectively be cutting rates on the Fed’s behalf by letting the dollar slide.”
Implications for Bitcoin and crypto
Bitcoin (BTC) and broader digital assets have remained volatile as investors consider whether prospective US rate cuts could stabilize prices after October’s liquidation drove the market lower.
While cryptocurrencies have historically benefited during periods of looser monetary policy, several analysts argue the dollar’s path may be a more decisive driver than benchmark interest rates.
Julien Bittel, head of macro research at Global Macro Investor, has previously characterized a strong dollar as a “wrecking ball” for risk assets, noting it can materially tighten global financial conditions.
Analysts, including those at Hong Kong-based digital asset platform OSL, have highlighted an inverse relationship between Bitcoin and the US Dollar Index, where dollar strength typically pressures risk assets such as cryptocurrencies and often accompanies a shift in risk appetite.
Expectations for further US rate cuts have eased in recent weeks as the Federal Reserve monitors inflation alongside stronger-than-expected GDP growth. Market pricing now assigns a probability of below 50% for cuts at the next two Fed meetings.
Fed rate cut odds. Source: CME Group
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