Bitcoin price reportedly fell nearly 3% on November 14 following comments from Federal Reserve Chairman Jerome Powell that there was no pressing reason for the central bank to cut interest rates. The statement sent shockwaves through the cryptocurrency market as traders anticipated a possible rate cut in December. Powell made the comments during a speech in Dallas, Texas, and emphasized the Fed’s conservative stance on policy due to high inflation volatility.
Market sentiment is affected by the Fed's stance
Bitcoin investors pay particular attention to Federal Reserve policy because interest rates have a major impact on, for example, the stock market. Lower interest rates typically trigger investments in relatively risky securities, such as Bitcoin, as safe-haven counterparts, such as bonds, become less attractive. However, this optimism was short-lived after Powell’s latest statement ruled out any rate cuts in the near future.
“This is not a sign that the economy is signaling that we need to cut rates quickly,” Powell said in his speech, following two recent rate cuts: a 50 basis point cut in September and another 25 basis points cut in November.
The next interest rate decision is due on December 18, but traders are now uncertain. Kobessi Letter, a financial newsletter, suggested in a tweet that the odds of a 25bps rate cut have now dropped to as low as 59%. “The ‘Fed Pivot’ is unraveling again,” the newsletter said.
Bitcoin Price Reacts to Fed's Hawkish Signal
Bitcoin fell 2.79% after Powell's speech and traded as low as $86,979, according to data from CoinMarketCap. Cryptocurrencies also fell, and although Bitcoin has since rebounded to $88,100, the cryptocurrency is still down 2.74% from the previous day.
Scholars explain that this is due to fading hopes among Bitcoin traders for a favorable change in monetary policy. Cryptocurrency trader Ava Marshall said, “BTC tends to rally on accommodative monetary policies, but Powell is holding back which dampens market sentiment.”
Worse still, inflation data released the same day showed the US Producer Price Index (PPI) rose 2.4 percent year-on-year in October, slightly above the expected 2.3 percent. The slightly higher-than-expected figure could further reduce the need for the Fed to cut interest rates in the near term.
Broader Implications for the Cryptocurrency Market
Bitcoin price movements are often used as a benchmark for the rest of the market. Likewise, the outlook shows that as the price of the leading digital currency Bitcoin falls, so do other coins. Ether (ETH), the second-largest cryptocurrency by market capitalization, fell 2.1%, and other altcoins, including Cardano (ADA) and Solana (SOL), also fell.
The uncertainty in US monetary policy is expected to keep the market volatile. Normally, a cut in interest rates would lead to high-risk securities such as crypto assets. On the other hand, if interest rates are high or there are long-term precautions from the Fed, such investments would be discouraged.
Economist Nouriel Roubini, commenting on the long-term effects, shared that “Some of Trump’s policies, including corporate tax cuts and deregulation, may help boost growth, but tariffs and trade tensions could raise interest rates.” The experience Roubini described shows that it is not easy to understand the factors that cause positive or negative reactions among market participants.
Conclusion on Bitcoin Price Decline
Therefore, the reaction of Bitcoin price to the Fed chairman's statement proves that the cryptocurrency is sensitive to monetary policy. With no further signs of interest rate cuts in the near term, traders and investors may face an uncertain environment in the run-up to the Fed meeting scheduled for December 18.
For now, BTC market enthusiasts are anxiously awaiting those signs as they look to see how the global economy will develop to understand the next direction of both the classical financial and crypto markets. Whether this downturn is just a minor blip on the radar or a harbinger of more bleak days to come remains to be seen.
