Bitcoin Price Reaction to Fed Rates: Key Insights for Crypto Traders

In its latest Federal Open Market Committee (FOMC) meeting, the U.S. Federal Reserve announced yesterday that it will keep interest rates unchanged at 4.25%-4.5%. Every Fed decision impacts financial markets, and Bitcoin is no exception. Over the past 24 hours, BTC has climbed 3.1%, reflecting investor optimism.

But how has Bitcoin reacted to past rate changes? And what might happen next? Let’s take a closer look.

The Fed’s Tightening Cycle

In April 2022, the federal funds rate was just 0.5%. However, inflation surged to 8.6% by May and peaked at 9.1% in June—the highest level in over a decade. To fight rising prices, the Fed began increasing interest rates.

Between May 2022 and July 2023, rates steadily climbed, reaching 5.5% by mid-2023. The rate then remained unchanged until August 2024, as inflation gradually cooled.

By August 2024, inflation had dropped to 2.5%, prompting the Fed to shift its stance. In September, it cut rates from 5.5% to 5%. Another reduction in November brought it to 4.75%, followed by a final cut in December to 4.5%.

These cuts fueled Bitcoin’s rally. After the September rate drop, BTC surged 10% in just ten days, marking the start of a strong bull run.

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Bitcoin’s Response to Recent FOMC Meetings

• March 2024: The Fed kept rates at 5.5%. Bitcoin initially surged to a new all-time high (ATH) before stabilizing between $71K and $61K in April.
• May 2024: No rate change. BTC showed minor signs of recovery.
• June 2024: Despite acknowledging lower inflation, the Fed kept rates steady. BTC fell to $58,360.67.
• July 2024: No change again. BTC plummeted, hitting a low of $48,919.60 in early August.
• September 2024: The Fed cut rates to 5%. Bitcoin soared 10%, kicking off a bull run.
• November 2024: Another 25 bps cut, combined with Donald Trump’s election victory, fueled BTC’s rapid growth.
• December 2024: The final rate cut (to 4.5%) pushed BTC to a new ATH of $108K.

2025: The Fed Pauses – Will Bitcoin Hold Its Gains?

At the January 2025 FOMC meeting, the Fed chose to keep rates at 4.5%, shifting to a “wait and see” approach. By then, Bitcoin had lost some bullish momentum but had still reached an ATH of $109K.

The Fed may be on pause, but Bitcoin never really stops. Whether it’s another surge or a cooldown, one thing’s certain – volatility is part of the ride.

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