Key Highlights
- The Fed paused rates at 3.5%-3.75%, signaling caution as jobs stabilize but inflation remains a concern.
- Cryptos reacted cautiously, with Bitcoin near $88K; traders are now watching dollar strength more than Fed moves.
- A weaker dollar may support crypto gains, while a strong dollar could act as a ‘wrecking ball’ for risk assets.
Defying intense political pressure and a series of verbal attacks from the White House, the Federal Reserve voted 10-2 on Wednesday to maintain the federal funds rate at 3.5%–3.75%. In its policy statement, the Federal Reserve highlighted that “job gains have remained low, and the unemployment rate has shown some signs of stabilization.” Inflation, it noted, remains “somewhat elevated.”
While the move was widely expected by institutional desks, the dissenting votes from Governors Stephen Miran and Christopher Waller highlight a growing rift within the FOMC. Both were appointed under President Donald Trump, highlighting ongoing debates about how fast the Fed should act.
Fed Chair Jerome Powell said that while the labor market is stabilizing, the Fed is in no rush to cut further until the inflationary effects of recent tariffs are fully understood.
Market response and crypto implications
Major cryptocurrencies reacted cautiously to the Fed announcement, indicating that market participants were waiting for Powell’s press conference for more insights. The current global cryptocurrency market cap is $2.98 trillion, down 1.34% in the last 24 hours, while the total trading volume is down 2.73% to $111.76 billion, as per CoinMarketCap data.
Bitcoin (BTC), the top cryptocurrency by market cap, is currently trading at $88,165.80 with a slight daily increase of 0.07%, although it has experienced a decline of 1.05% and 2.14% in the last week and month, respectively. The market capitalization of Bitcoin is above $1.76 trillion, with approximately 20 million BTC in circulation.
Ethereum (ETH) traded around $2,950, up just 0.05% for the day but down 1.8% over the week. Binance’s BNB rose slightly to $898.65, and XRP gained 0.31%, reaching $1.88. With this market performance, therefore, the Fed’s decision didn’t shake crypto markets immediately, but changes in the dollar’s strength could have a bigger impact on prices over time.
Dollar dynamics and broader market signals
The US dollar continues to weaken, with the Bloomberg Spot Dollar Index reaching new four-year lows. President Trump dismissed the decline of the dollar, stating, “The value of the dollar is great.” Some analysts say that President Trump indirectly supports lower rates by weakening the dollar.
The Kobeissi Letter called it “a clear signal that President Trump is willing to tolerate a weaker Dollar to push rates lower and boost US exports.” Similarly, Bloomberg TV APAC noted, “President Trump may effectively be cutting rates on the Fed’s behalf by letting the dollar slide.”
Historically, cryptocurrencies have performed well under loose monetary policy. However, experts argue that dollar strength often outweighs rate changes in driving crypto sentiment. Julien Bittel, Head of Macro Research at Global Macro Investor, described a strong dollar as a “wrecking ball” for risk assets.
The Fed’s decision to pause shows it’s being careful with the economy while inflation is still a concern. Cryptocurrencies tend to react more to the dollar’s strength, so how the dollar moves will likely shape crypto prices.
Also Read: U.S. Senators Set to Vote on Crypto Market Bill on January 29
