Cryptocurrencies rise despite reduced Fed rate cut expectations

Bitcoin price dipped after the release of the US inflation report on Wednesday, briefly testing the $94,000 level support, but rallied later, rising to $97,700. If BTC price declines, support can be found at $94,000, while resistance may be encountered at $100,000. 

Ethereum price surged on Wednesday, rising from $2,600 to $2,750. If Ethereum's price declines, it may encounter support near $2,500, while if it increases, resistance may be encountered near $2,900.

Bitcoin price registered a new all-time high of $109,880 in January but has since been under pressure by increased risk aversion sentiment. Most major cryptocurrencies are under pressure, on concerns that US President Donald Trump’s trade policies may start global trading wars. 

Trump has been using threats of imposing trade tariffs as a negotiation tool to further his agenda with other countries. The uncertainty over Trump’s future policies and trade tariffs is generating a risk aversion sentiment, putting pressure on crypto markets.

US President Donald Trump has been using threats of imposing trade tariffs as a negotiation tool to further his agenda with other countries. Trump has threatened that he will announce reciprocal tariffs on many countries, which would raise US import taxes to match those imposed by the country’s other trading partners. On Monday, Trump announced a 25% tariff on steel and aluminum imports for all countries importing into the US, raising concerns over global trade wars. If Trump goes through with these heavy tariffs, global inflation is likely to rise and the economic outlook will worsen, thus promoting a risk aversion sentiment, which puts pressure on crypto markets.

Trump’s proposed plans for building a Bitcoin strategic reserve have been boosting Bitcoin price. Growing expectations that the US government will adopt a pro-crypto regulatory and fiscal policy are boosting crypto markets. 

Cryptocurrency prices are also affected by central banks’ interest rates. High interest rates stifle economic growth, putting pressure on crypto markets. The US Federal Reserve held interest rates steady at its January meeting, after delivering three consecutive rate cuts in 2024. FOMC policymakers voted unanimously to maintain the federal funds range to a target range of 4.25% to 4.50. 

US inflation data released on Wednesday were hotter than anticipated, indicating that inflationary pressures are on the rise and lowering Fed rate cut expectations. Headline inflation rose by 3.0% year-on-year in January after rising by 2.9% in December against expectations of a 2.9% print. Market odds of another rate cut dropped after the release of the US inflation report on Wednesday. Markets are pricing in only a single 25bps rate cut within the year as inflationary pressures remain high. 

Fed Chair Jerome Powell delivered a mildly hawkish message after the policy meeting. Powell stated that the Fed’s approach will remain data-driven and stressed that the central bank needs to consider potential policy changes under Trump’s administration. On Tuesday, Powell testified about the Semi-Annual Monetary Policy Report before the Senate Banking Committee. Powell’s speech was hawkish, hinting that the Fed may pause rate cuts for some time. Powell completed his two-day semiannual Monetary Policy Report on Wednesday, with a testimony before the House Financial Services Committee. Powell stressed that the battle against inflation is ongoing and stated that he does not intend to resign if asked to by Trump.

BTC/USD 1h Chart

ETH/USD 1h Chart

TRADE CRYPTO

The content provided in this material and/or any other material that this content is referred to, whether it comes from a third party or not, is for information purposes only and shall not be considered as a recommendation and/or investment advice and/or investment research and/or suggestions for performing any actions with financial products or instruments, or to participate in any particular trading strategy and cannot guarantee any profits. Past performance does not constitute a reliable indicator of future results. TopFX does not represent that the material provided here is accurate, current, or complete and therefore shouldn't be relied upon as such. This material does not take into account the reader's financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of TopFX, no reproduction or redistribution of the information provided herein is permitted.

Written by:
Myrsini Giannouli

Share the article: