Bitcoin Slides Below $43K as Powell Dashes Hopes of March Rate Cut

The price of Bitcoin (BTC) fell below $43,000 on Wednesday after Federal Reserve Chair Jerome Powell said that he does not expect the central bank to cut interest rates in March. The cryptocurrency market reacted negatively to Powell’s hawkish comments, which reduced the chances of an imminent easing of monetary policy.

Fed Keeps Rates Unchanged, Signals No Rush to Cut

The Federal Reserve announced on Wednesday that it decided to keep its benchmark interest rate unchanged at 5.25-5.5%, as widely expected by the market. The Fed also said that it will continue to monitor the inflation situation and that it will not cut rates until it has more confidence that inflation is moving sustainably lower.

Powell, in his press conference, said that it is “not likely” that the Fed will be confident enough by March to cut rates, as some investors had hoped. He added that the Fed needs to see more data and evidence that inflation is moderating before making any policy changes.

Powell’s remarks disappointed the market, which had been pricing in a high probability of a rate cut in March, following the recent slowdown in economic growth and the surge in the Omicron variant of COVID-19. According to the CME FedWatch Tool, the implied probability of a 25 basis point rate cut in March dropped from over 40% on Tuesday to 35.5% on Wednesday.

Bitcoin and Crypto Market React to Powell’s Comments

The cryptocurrency market, which is sensitive to changes in monetary policy and liquidity conditions, reacted negatively to Powell’s comments. Bitcoin, the largest and most influential cryptocurrency, slid below $43,000, down 2.6% in 24 hours, according to CoinMarketCap. Bitcoin had been trading above $44,000 earlier in the day, before the Fed announcement.

Other major cryptocurrencies also followed Bitcoin’s lead and declined in value. Ethereum (ETH), the second-largest cryptocurrency by market capitalization, dropped 3.4% to $3,200. Binance Coin (BNB), the third-largest cryptocurrency, fell 4.2% to $480. The total market capitalization of all cryptocurrencies decreased by 3.5% to $2.1 trillion.

The crypto market had been enjoying a strong rally in the past few weeks, driven by several positive factors, such as the approval of spot Bitcoin ETFs in the US, the anticipation of the Bitcoin halving in March, and the expectation of more stimulus and rate cuts from the Fed. However, Powell’s comments dampened the bullish sentiment and triggered a wave of profit-taking and risk aversion.

What’s Next for Bitcoin and Crypto?

Despite the short-term setback, many analysts and investors remain optimistic about the long-term prospects of Bitcoin and the crypto market. They believe that the macroeconomic backdrop is still favorable for cryptocurrencies, as the Fed will eventually have to cut rates and ease financial conditions, given the persistent inflation pressures and the uncertain outlook for the economy.

Moreover, they point out that Bitcoin and crypto have many other bullish narratives to support their growth, such as the increasing adoption by institutional and retail investors, the innovation and development of the crypto ecosystem, and the scarcity and security of the Bitcoin network.

Therefore, they expect that any major dips in the crypto market will be met with strong buying demand, as investors see them as opportunities to accumulate more crypto assets at lower prices. They also anticipate that Bitcoin will resume its uptrend and challenge its all-time high of $48,000, which it reached in November 2023.