Bitcoin Recovers After Initial Dip Following Fed’s Rate Decision and Hawkish Statement
Bitcoin initially dropped following the Federal Reserve’s hawkish tone in its policy statement but managed to recover later in the day.
As anticipated, the U.S. Federal Reserve held its benchmark fed funds rate steady at 4.25%-4.50%, marking the first pause in rate hikes since the central bank began easing policy in September of the previous year.
The policy statement acknowledged that while unemployment remained at a “low level,” inflation was still “somewhat elevated.” The hawkish language stood out as the Fed removed last month’s mention of “progress” towards the 2% inflation target, signaling a more cautious approach.
Bitcoin (BTC), under pressure for much of the day, briefly dropped to $101,800 following the Fed’s announcement. U.S. stocks followed suit, with the Nasdaq falling 1.1% and the S&P 500 dropping 0.9%. Meanwhile, gold and the dollar showed little movement, and the 10-year Treasury yield rose by 5 basis points to 4.59%.
Since the first rate cut in September, the Fed has reduced its benchmark rate by 100 basis points. However, the U.S. 10-year Treasury yield has risen to 4.6% from 3.6%, creating a rare divergence between short-term and long-term rates. This unusual shift, coupled with stronger-than-expected economic and inflation reports, has not gone unnoticed by the Federal Reserve.
In his December meeting remarks, Fed Chair Jerome Powell indicated that further rate cuts were unlikely for the time being. At his post-meeting press conference, Powell clarified that the change in language regarding inflation was not intended to signal any drastic policy shift. Bitcoin and stocks both rebounded off their lows after his comments, with Bitcoin climbing back above $103,000 by the end of the conference.
