According to Cointelegraph: Bitcoin’s price saw a nearly 3% drop following statements from Federal Reserve Chair Jerome Powell, suggesting that an anticipated rate cut in December may not be forthcoming. Powell’s speech in Dallas on November 14 highlighted a cautious stance on further rate reductions, impacting market expectations and prompting a downturn in Bitcoin’s value. The cryptocurrency briefly fell to $86,979 before rebounding slightly, trading at $88,100 by the time of publication.
Why Interest Rates Matter to Bitcoin Investors
Interest rates play a key role in Bitcoin’s appeal as an alternative investment, with lower rates typically encouraging shifts from traditional assets to cryptocurrencies.
“The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said in Dallas, Texas. His remarks followed recent cuts of 50 and 25 basis points in September and November, respectively.
Impact of Powell’s Comments on Bitcoin’s Price and Trader Sentiment
Powell’s comments come as the Federal Reserve considers its upcoming decision on interest rates, scheduled for December 18. His assertion of a careful approach, driven by current economic strength, tempered hopes among traders who had expected a December rate cut to stimulate the market. As a result, Bitcoin (BTC) dipped approximately 2.79% to $86,979, according to CoinMarketCap, before recovering slightly to $88,100.
The cautious tone from the Fed has softened traders’ confidence, with market resource The Kobessi Letter reporting that the odds of a 25-basis-point cut dropped to 59% as of November 14. “The ‘Fed pivot’ is being undone once again,” it observed in a post on X (formerly Twitter).
Economic Data and Fed Policy Affect Bitcoin Market Sentiment
The impact of interest rates on Bitcoin is significant, as lower rates reduce returns on conventional assets like bonds, potentially driving interest toward alternative assets such as Bitcoin and tech stocks. Market volatility may also rise in response to the latest U.S. inflation data, with the October Producer Price Index (PPI) showing a 2.4% annual increase, slightly above the 2.3% forecast. This close alignment with expectations provides minimal incentive for an immediate rate change, adding further weight to Powell’s stance.
In a related discussion, economist Nouriel Roubini noted on November 14 that some policies under Trump could boost growth and inflation, including corporate tax reductions and deregulation. However, he cautioned that tariffs and migration policies might ultimately push interest rates higher.
Bitcoin Market Outlook Ahead of December Rate Decision
Bitcoin now trades at $88,100, with future price movements potentially influenced by the Fed’s December rate decision. Investors should monitor economic indicators closely, as Powell’s comments hint at a careful and data-driven approach by the Federal Reserve.
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