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crypto.news 2025-03-20 09:04:28

Analysis: Crypto markets react differently to each unchanged Fed rate decision

Santiment’s latest analysis shows that crypto markets have historically reacted unpredictably to Federal Reserve interest rate decisions. In a Mar. 20 post , Santiment contributor Brian noted that while some Fed decisions trigger rallies, others lead to sharp declines despite similar policy outcomes. This pattern has been in place since the Fed started sharply raising interest rates in 2022 to combat soaring inflation. The central bank raised rates from near zero in March to 4.50% by December as inflation hit a 40-year high of 9.1%. Financial markets were shaken by this change, and stocks and cryptocurrencies saw sharp declines. By late 2022, Bitcoin had fallen below $16,000 from its peak of $69,000 in late 2021. Liquidity tightened and borrowing costs increased, hurting risk assets everywhere. Since then, the crypto market has remained very sensitive to Fed policy. Bitcoin jumped over $72,000 in March 2024 when the Fed held rates steady, but it fell sharply the following month. A similar pause in May resulted in an instant recovery, but a July decision caused Bitcoin to plummet 20% before stabilizing. You might also like: A $108T global liquidity surge should be sending Bitcoin to the moon — So why isn’t it? When the Fed lowered interest rates for the first time last year in September, it triggered a strong rally. In November, a pro-crypto election outcome and another rate cut sent Bitcoin to all-time highs. But the market lost steam when the Fed kept rates unchanged in December, leading to a correction . The latest Federal Open Market Committee meeting on Mar. 19 kept rates at 4.25%–4.50% as expected. Santiment noted that social discussions around the decision were lower than during past meetings, suggesting traders had already priced it in. Still, the market reacted positively. Bitcoin ( BTC ) rose 4.5% to $85,786, briefly hitting $87,431, while Ethereum ( ETH ) and Solana ( SOL ) posted gains of 4% and 6%. The total crypto market cap climbed 2% to $2.91 trillion, and futures markets saw $355 million in liquidations, mostly from short positions. Fed chair Jerome Powell has confirmed that two rate cuts are still expected this year. However, there are still concerns about inflation and slowing economic growth. Since historical responses indicate that initial moves can be misleading, it is still unclear if the market will maintain its recent gains. Read more: Here’s why altcoins like Uniswap, Stellar, Algorand, and Pepe going up

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