Following the recent announcement by the Federal Reserve regarding interest rates, Bitcoin’s response was measured as it surged to reclaim the $105,000 mark. The Fed’s decision on January 29 to maintain interest rates at 4.25%-4.5% was attributed to the ongoing issue of high inflation.
In a statement issued by the Federal Reserve, it was mentioned that “The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.”
Bitcoin Responds to Concerns Over Inflation
Despite the somewhat hawkish tone, Federal Reserve Chair Jerome Powell did not express overt pessimism during the press conference. Surprisingly, Powell indicated a willingness to lower rates even if the 2% inflation target was not met.
While the market had anticipated the decision to hold rates, Powell’s mixed messaging during the press conference caused Bitcoin to fluctuate within the $100,000 to $105,000 range in the short term.
Notably, President Donald Trump criticized the Fed’s decision to maintain interest rates and voiced his dissatisfaction with Powell. He suggested that he would address U.S. inflation by increasing energy production to lower commodity prices.
As attention now shifts towards crucial inflation data, all eyes are on the upcoming release of the PCE (Personal Consumption Expenditures) price index on January 31st.
Impact of the U.S. Inflation Report on Bitcoin
Matt Mena, a crypto strategist at 21Shares, discussed with CryptoCrypto how the PCE price index report due on Friday could influence Bitcoin. He explained, “While today’s Federal Reserve decision did not significantly shake the market, investors are awaiting confirmation of potential rate cuts. Until then, Bitcoin is likely to consolidate within its current range, with $105,000 serving as a pivotal breakout level. If Friday’s data favors risk assets, the next significant upward target may be at $108,000.”
Mena’s insights align with Coinglass’s liquidation heatmap chart for the next two weeks.
Generally, areas of high liquidity tend to attract prices. In a scenario of sweeping liquidity, Bitcoin might aim for the immediate liquidity levels highlighted in bright yellow at $108,000 and $110,000. Conversely, negative inflation data could push Bitcoin towards the lower liquidity levels around $97,500.