Cryptocurrency prices fell sharply after the Federal Reserve maintained interest rates, despite positive stock market news following a peace deal with Iran.
Cryptocurrency prices fell sharply on Thursday despite positive news from the stock market, which was buoyed by a peace agreement with Iran. The decline came in response to the Federal Reserve's decision to maintain interest rates while expressing heightened concerns about inflation.
Bitcoin dropped approximately 3% to around $63,900, although it still shows a 2% increase over the past week. Other major cryptocurrencies also saw declines, with ether down 3.4% to $1,733, XRP falling 3.9% to $1.17, and solana decreasing by 3.6% to $71. Hyperliquid's HYPE, which had been performing well, fell by 7.2% to $69 but remains up about 28% over the week. Tron was the only major cryptocurrency to register a gain, rising by 0.9%.
The Federal Reserve's decision to hold rates steady at 3.5% to 3.75% was in line with market expectations. However, the central bank's revised forecasts suggest a more pessimistic outlook for inflation and a slower pace for future rate reductions, with some officials hinting at the possibility of further rate hikes. This shift towards a hawkish stance is typically unfavorable for riskier assets, including cryptocurrencies.
This meeting was the first under new Chairman Kevin Warsh, who highlighted the central bank's commitment to price stability amid significant debate prior to the vote. While stocks rallied on the news of the U.S.-Iran peace deal—S&P 500 futures rose up to 0.9% and Nasdaq futures increased by 1.5%—cryptocurrencies did not share in this positive sentiment, indicating their greater sensitivity to monetary policy than geopolitical events.
Analysts believe that bitcoin will likely remain within the $60,000 to $70,000 range unless a significant catalyst emerges, such as new legislation affecting the crypto market or further easing of tensions with Iran. Gerry O'Shea, head of global market insights at Hashdex, noted that the current weak sentiment in the crypto market is due to investor focus shifting towards IPOs and AI stocks, although he anticipates a return of capital to crypto as institutional interest grows and regulations become clearer.
Despite the current downturn, the price movements suggest a consolidation phase rather than a capitulation, with bitcoin stabilizing in the low $64,000s, indicating that selling pressure may be easing, albeit with cautious buyers due to the Fed's tightening policy.
