Bitcoin prices plummeted to USD 56,550 on Wednesday after the Federal Reserve kept interest rates at current levels of 5.25%-5.50%.
The Federal Open Market Committee (FOMC) did what most analysts had predicted by keeping the benchmark federal funds rate at its current level of 5.25% to 5.50%. Central Bank said in a statement: "To support its targets, the Commission has decided to maintain its target range for the federal funds rate at 5.25% to 5.50%."
Bitcoin briefly rose to 60,989.58 USD before reversing lower, leaving more than 6 million USD short order liquidation out of a total of USD liquidation worth of positions before a sharp fall reversal to the USD 56,600 mark.
"higher real Intrerest Rate may have support the dollar and put pressure on bitcoin over the past month. The FOMC statement expressed concern about inflation, but did not rule out a fall rate cut. Expectations of future rate fall will support Bitcoin prices and the cryptocurrency market more openly."
Zach Pandl, head of research at Grayscale Investments, said
Bitcoin strong growth in Q1 2024 with key catalysts from U.S. ETF funds and halving events. Fearful sentiment has rise to the sky this week amid a Bitcoin fall of more than 10% for the week, recording its worst month since November 2022.
On the possibility of a rate fall cut, the central bank said, "The Committee does not expect fall the rate target range to be necessary until it gains greater confidence that inflation is moving sustainably toward 2%."
"In addition, the Commission will continue to fall its holdings of Treasury securities, agency debt and agency stake securities. Starting in June, the Commission will slow the pace of fall its securities holdings by fall monthly acquisition limits on Treasury securities between USD 60 billion and USD 25 billion," the FOMC statement added.
The statement added that it will maintain the monthly acquisition limit on agency debt and agency stake-backed securities at USD 35 billion and will reinvest any principal payments exceeding this limit in Treasury securities.
Major stock indexes remain strong in the face of the new reality that rate fall cuts may come later than expected. In midday trading in the US yesterday, the Dow Jones Industrial Average rose 0.4%, the S&P 500 rose 1.02% and the Nasdaq Composite rose 2.03%.
Volatility the stock market witnessed an increase over the past day. The CBOE Volatility Index (VIX), which measures the expected volatility of the S&P 500 over the next 30 days, rose 0.15% to 15.79 points. Gold rose 0.56% over the past 24 hours to 2,304 USD an ounce.
The yield on the 10-year Treasury note fall slightly after the Fed's announcement, steadying at 4.683% on Tuesday.
According to a report by QCP Capital on Wednesday, the US dollar is on track to rise to the sky against everything. Analysts of the report noted that the USD-JPY pair touched the historical level of 160 on Monday, forcing the Bank of Japan to intervene. Intrerest Rate of U.S. two-year bonds has surpassed 5% on rising inflation concerns and the market is worried about the 10-year yield also surpassing 5%.
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CME's FedWatch tool now forecasts a 93.6% chance that rates will stay tuned at the FOMC meeting in June.
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