Crypto markets dip on reduced Fed rate cut expectations

Bitcoin plummeted from $83,800 to below $82,000 on Tuesday. If BTC price declines, support can be found at $79,500, while resistance may be encountered at $85,100. 

Ethereum price dipped from $1,940 to $1,910 on Tuesday. If Ethereum's price declines, it may encounter support near $1,820, while if it increases, it may encounter resistance near $2,000.

Bitcoin price registered a new all-time high of $109,135 in January but has since been under pressure by increased risk aversion sentiment. Expectations of a crypto-friendly US policy are providing support for crypto markets even as imminent global trade wars push crypto prices down. Bitcoin lost more than a quarter of its value since Trump’s inauguration marked its all-time high and the crypto market capitalization decreased by almost a trillion in the past month.

Trump has announced the creation of a national Bitcoin reserve, stressing his determination to make the US the crypto capital of the world. The US reserve will be created with Bitcoin already owned by the federal government through seizures due to criminal activities according to a statement by crypto Czar David Sacks. Fron now on, the US government will cease to sell Bitcoin and will stockpile it instead as a store of value. Bitcoin price, however, continued to retreat after Trump’s launch of a US Bitcoin reserve, as global economic concerns have lowered risk appetite. 

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%. 

Market odds of rate cuts within the year are on the rise, putting pressure on the dollar and US treasury yields. Fed rate cut expectations rose after the release of the US inflation report last week. The Fed, however, is widely expected to keep interest rates steady at this week’s policy meeting on the 19. Markets are pricing in two more rate cuts this year, with the first rate cut in June, while a third rate cut is also considered possible. This week markets will focus on the Fed’s ‘dot plot’, which is a summary of the central bank’s economic projections and reflects the Fed rate outlook.

Hostilities in the Gaza area were resumed this week, breaking the ceasefire deal between Israel and Hamas and promoting a risk aversion sentiment. Israel launched an airstrike in the Gaza area, killing more than 400 people and breaking the ceasefire deal. The Israeli government threatened that there was more to come, shuttering the peace in the region, and putting pressure on crypto markets. 

Most major cryptocurrencies are under pressure due to concerns that US President Donald Trump’s trade policies may start global trading wars. The uncertainty over Trump’s future policies and trade tariffs is generating a risk aversion sentiment, putting pressure on crypto markets. Trump’s tariffs are likely to raise global inflation and lower the economic outlook, thus promoting a risk aversion sentiment that puts pressure on crypto markets. Trump’s economic policies are also raising concerns that the US economic growth will slow down. Many analysts are already expressing concerns that the US will enter a recession.

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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