Bitcoin Responds to Jerome Powell’s Cautious Approach Towards Fed Rate Adjustments
The recent rise in Bitcoin’s value was halted at $98K and then dropped to $95K after the Federal Reserve Chair, Jerome Powell, expressed a conservative view on reducing interest rates.
In his latest monetary report to the U.S. Congress on February 12th, Powell reiterated the Fed’s stance of proceeding cautiously when it comes to policy changes.
He stated, “Our current policy is less restrictive than before, and the economy is robust. There is no urgency to modify our policy stance.”
A decrease in interest rates typically results in lower borrowing costs, which is favorable for assets with higher risk like Bitcoin and equities.
However, the anticipation of minimal rate cuts by the Fed, coupled with the impact of Trump’s trade policies, has increased negative market sentiment.
Could the January CPI Report Influence Bitcoin’s Performance?
The Federal Reserve’s decisions depend on factors like employment and inflation levels in the U.S. This makes the upcoming release of the January Consumer Price Index (CPI) report on February 12th crucial for market participants.
Forex Factory data projects a 0.3% monthly change in last month’s CPI.
If the actual CPI exceeds expectations, it might be seen as a negative signal, potentially leading the Fed to delay rate adjustments. Conversely, a lower CPI figure could slightly boost market sentiment and increase the likelihood of a rate cut.
Market analysts are currently estimating a 95% chance of another rate pause similar to January during the upcoming Federal Open Market Committee (FOMC) meeting in mid-March.
It remains to be seen whether the CPI data release will alter market expectations.
It’s worth noting that ongoing headline risks have muted overall demand, as indicated by the Coinbase Premium Index, reflecting U.S. investors’ interest in Bitcoin.
Following a surge in early February, the indicator has now stabilized at a neutral level, coinciding with Bitcoin’s retreat from $101K to $95K.
Further decline in the Coinbase Premium Index could impede Bitcoin’s short-term recovery, despite the potential supply shortage due to decreasing OTC balances.
Bitcoin’s market is expected to remain volatile, indicated by the Coinglass liquidation heatmap, which highlights varying levels of liquidity around price movements.
As a result, Bitcoin might continue trading within the range of $94K to $100K in the near future.