When it comes to the US currency, President Trump and Treasury Secretary Bessent have expressed opposing views. For the moment, the path of least resistance is weaker, but with limits.
While that should have triggered a sustained rally in cryptos, Federal Reserve's pause after three rate cuts in a row late last year pushed digital assets significantly lower.
This week, after surpassing $89,500, Bitcoin's price initiated a recovery trend, yet it struggled to exceed the $90,000 mark.
If Bitcoin falls below $87,000, it could potentially extend its decline.
Many in the financial sector anticipated Wednesday's decision by the US Federal Reserve to keep rates unchanged and defy US administration's pressure for deeper and faster rate cuts.
Analysts suggest that a path to more favorable financial conditions may yet emerge indirectly, even though this step implies a temporary pause.
After posting its worst annual performance since 2017, the US dollar has continued to weaken this week.
Investors are debating how more US interest rate decreases would affect the market's recovery from the steep decline brought on by October's liquidation.
There has been a great deal of volatility in Bitcoin and the cryptocurrency market as a whole.
Whenever monetary policy has been loose, digital assets have done quite well. The path of the US dollar, according to economists, could be even more important than interest rates.
The Fed is closely monitoring inflation and the unexpectedly robust GDP growth, leading to a diminished expectation for future rate cuts in the US for the time being.
For the Fed's upcoming two meetings, market participants currently anticipate a probability of less than 50% for a rate cut.
A rising sense of certainty that the cycle of policy easing is drawing to a close was evident in the Fed statement and press conference.
Treasury rates and the currency have received some support from recent events, but they still face further obstacles.
The division within Fed members was expected, with both Governor Chris Waller and Stephen Miran voting for a 25 basis points cut.
It's important to note that Stephen Miran's time concludes on Saturday, marking this as his final meeting.
Current prediction markets position Chris Waller in third place, trailing behind Rick Rieder and Kevin Warsh, yet his name continues to surface in discussions regarding the Fed Chair position.
The main point to note is a somewhat cautious tone.
During the December FOMC meeting, officials indicated that there had been an increase in downside risks to employment in recent months; however, they opted to omit that statement in Wednecday's discussion.
The expansion is characterized as “solid,” and they recognize “some indications of stabilization” in the jobless rate.
During the press conference, Chair Powell recognized the data distortions stemming from the pandemic, yet indicated that the growth outlook has shown signs of improvement in recent months.
The Fed boss also indicated that he had no intentions of addressing questions about his future plans.
Powell's tenure as chair concludes on May 15th, yet he could stay on the FOMC until January 31st, 2028, allowing him to maintain his voting rights beyond that date.
Even though the precious metals sector as a whole was experiencing a bullish windfall, the Fed's decision went against projections made on Polymarket and Kalshi, which put more downward pressure on Bitcoin.
The Fed's attempts to stabilize the dollar appear to be temporary, as Trump advocates for additional rate cuts while quantitative easing persists.
Treasury Secretary Scott Bessent indicated that President Trump is expected to announce his nominee for the Federal Reserve chair in approximately a week, following the FOMC's decision to maintain interest rates at their current levels.
Consequently, the upcoming capital shift from the precious metals sector is poised to bring about a favorable change in the overall optimistic outlook of the cryptocurrency market.
Gold Bites Into Other Assets
The unwavering commitment of investors to tangible assets has propelled gold and silver to unprecedented heights.
Meanwhile, the potential for military action against Iran, as suggested by President Trump, has led to a surge in oil prices, marking the highest levels seen in four months.
As the Asian markets retreated from the recent spike in tech stocks, Bitcoin stayed around $88,000 Thursday. Attention from investors has shifted to recent earnings results, signals from central banks, and a fresh rising trend in gold prices.
The unwavering commitment of investors to tangible assets has propelled gold and silver to unprecedented heights.
For cryptocurrency, the sentiment remained prudent.
Recent activity in thin spot ETFs and a more cautious approach to derivatives have resulted in Bitcoin trading within a narrow range. Traders are now seeking a more definitive catalyst from risk markets, earnings reports, and forthcoming indications from policymakers.
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