bitcoin rose above $94,000 and then quickly retreated as Federal Reserve Chair Jerome Powell appeared both dovish and hawkish after the central bank delivered a 25 basis point rate cut on Wednesday.
Swaying around $92,000 for most of the day, BTC soared to $94,400 as Powell, in his post-meeting press conference, emphasized the risks of a possibly weaker-than-thought labor market, before giving back most of the gains after saying the battle over 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% over the same period.
Fed policy, Powell said in his post-meeting news conference, is now “within a range of plausible estimates of neutrality, and leaves us well positioned to determine the extent and timing of further adjustments.”
“We are well positioned to wait and see [about further rate cuts]”he added.
Powell acknowledged that there will be “a lot of data” ahead of the next Federal Reserve meeting in January that will influence how the central bank moves forward.
Along with the Fed’s earlier decision to cut its federal funds rate range by 25 basis points, the New York Fed announced it will begin purchasing short-term Treasury bills and Treasury securities with remaining maturities of up to 3 years 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 full-blown quantitative easing cycle.
Powell said purchasing will remain “elevated” for a few months.
This marks a change from the last three years in which the central bank reduced its balance sheet following rapid expansion during the pandemic years.
The analyst takes
“The Federal Reserve made clear that this cut does not mark the start of an aggressive easing cycle, with an emphasis on the fact that future moves will largely depend on incoming inflation and labor market data,” Daniela Hathorn, senior market analyst at brokerage firm Capital.com, said in a note.
“While policymakers agreed on the need for modest easing amid spotty post-lockdown data and signs of slowing momentum, the updated communication emphasized caution,” he added.
“The fact that two FOMC members voted to leave rates unchanged shows it was a close decision, complicated by a lack of complete data,” said Brian Coulton, chief economist at Fitch Ratings. The relatively mild pick-up in core inflation in recent months likely convinced the committee that another cut was warranted, keeping rates somewhat above neutral.
“It seems unlikely that rates will continue to fall in sequential meetings from here. We now expect just two more cuts by June 2026, taking the federal funds rate to 3.25% (upper band),” he said.
“Between signaling a pause in rate cuts and restarting the Fed’s purchases of US Treasuries, Powell is threading the needle between his two mandates,” said David Hernández, crypto investment specialist at 21Shares.
For Bitcoin to break out of its trading range, Hernandez said it needs fresh momentum to “dominate concentrated short pressure” around the $94,500 resistance zone, right where Wednesday’s breakout peaked.
“If spot ETF inflows strengthen as expected now that the cost of capital is falling, that could become the spark that transforms caution into momentum and propels Bitcoin back above the psychological barrier of $100,000,” he said.
