Bitcoin Drops Below $65,000 After Federal Reserve Decision

August 01, 2024 12:00 AM AEST | By Team Kalkine Media

Bitcoin Drops Below $65,000 After Federal Reserve Decision — Image source: shutterstock.com

Federal Reserve Holds Interest Rates Steady

The price movement in Bitcoin closely followed the Federal Open Market Committee’s (FOMC) decision to keep interest rates unchanged at 5.25% to 5.5%. This decision, anticipated by the market, reflects the Fed's ongoing approach to managing economic growth and inflation. Fed Chair Jerome Powell indicated that the economy is growing at a “solid pace” with favorable signs for GDP growth and Private Domestic Final Purchases (PDFP). Despite a slowdown in consumer spending, Powell underscored the Fed's commitment to reducing inflation from 7% to 2.5% and striving to achieve a 2% inflation rate to support overall economic stability.

Market Expectations and Bitcoin’s RSI

Before the Fed’s announcement, market expectations were that the FOMC would hold off on changing rates until September. According to pseudonymous crypto commentator Seth, Bitcoin’s relative strength index (RSI), a tool used to identify overbought and oversold conditions, is currently considered “oversold.” This condition is often interpreted as a potential signal for a buying opportunity, suggesting that despite recent declines, there could be a chance for a market rebound.

Geopolitical Tensions Impact Bitcoin Prices

The decline in Bitcoin’s price also coincides with escalating geopolitical tensions. Reports emerged on July 31 from Reuters about the assassination of Hamas leader Ismail Haniyeh in Tehran, Iran. This event has contributed to market uncertainty, affecting Bitcoin’s value. Bitcoin has previously shown sensitivity to geopolitical events; for instance, on April 19, 2024, Bitcoin dropped 5.44% to $59,698 following reports of explosions at Isfahan airport in Iran.

Fed’s Optimism and Possible Rate Cut

Despite the current economic challenges, there is cautious optimism about a potential rate cut in September. The Kobeissi Letter noted that while Fed Chair Powell has not explicitly confirmed a rate cut for September, his remarks have been more optimistic. The Fed is expected to review inflation data over the next two months, with further declines potentially paving the way for a rate reduction. This sentiment is echoed by Moody’s Analytics chief economist Mark Zandi, who anticipates that inflation data will align with the Fed’s forecast, supporting the likelihood of a September rate cut. Zandi pointed out that global investors have responded positively, with rising stock prices and falling bond yields.

Dovish Fed Tone and Implications for Bitcoin

In addition, Michael van de Poppe, founder of MN Trading, believes that Fed Chair Powell’s “dovish tone” regarding future monetary policy is favorable for Bitcoin and other cryptocurrencies. This optimistic outlook from the Fed could be seen as supportive for Bitcoin’s market performance, suggesting that the current economic environment may ultimately benefit the cryptocurrency sector.

Bitcoin’s Volatility and Market Reactions

Bitcoin's price volatility has been a recurring theme in response to various economic and geopolitical events. The recent drop below $65,000 highlights the cryptocurrency's sensitivity to broader economic policies and geopolitical tensions. As Bitcoin continues to navigate through these challenges, market participants remain attentive to both economic indicators and geopolitical developments that could influence future price movements.

Bitcoin's recent decline below $65,000 reflects a combination of factors including the Federal Reserve’s interest rate decision and geopolitical tensions. While the current market conditions present challenges, the potential for future rate cuts and ongoing economic developments could impact Bitcoin’s performance in the coming months.

Disclaimer

The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media Pty Ltd (Kalkine Media, we or us), ACN 629 651 672 and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used on this website are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures displayed/music used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source wherever it was indicated as or found to be necessary.