Bitcoin price jumps above $85,000 as the Federal Reserve maintains interest rates

The cryptocurrency market experienced a strong rally following the Federal Reserve's decision to maintain interest rates, with Bitcoin climbing above $85,000 and

The cryptocurrency market responded strongly to the Federal Reserve's decision to maintain interest rates, pushing Bitcoin above $85,000 and shifting market sentiment from fear to neutral.

The Fed announced on March 19 that it would keep interest rates steady at 4.25%-4.50%. This decision comes as the central bank continues to grapple with high inflation and slowing economic growth, prompting a cautious approach to monetary policy.

"We will need to proceed cautiously in evaluating the economic data and adjusting monetary policy to complete the work of bringing inflation down to 2% in a sustainable way," Fed Chair Jerome Powell said in a press conference.

Still, he acknowledged that inflation remains "unacceptably high" and warned that tariffs could prolong the fight against rising prices. These factors have contributed to the central bank's cautious stance.

The Fed's latest dot plot shows a shift toward fewer rate cuts for 2025. Officials now project a total of 50 basis points in cuts next year, which translates to two 25 basis point reductions. This is a reduction from earlier expectations, with four officials now seeing no rate cuts, four suggesting a 25 basis point cut, and nine supporting a 50 basis point cut. More aggressive cuts of 75 and 100 basis points are no longer supported.

The central bank also revised its economic outlook, projecting GDP growth of 1.7% in 2025, down from a previous estimate of 2.1% made in December. Meanwhile, projections for inflation have been adjusted upward, with the Fed now expecting PCE inflation to reach 2.7% by the end of 2025, a higher figure compared to earlier estimates.

Market Response

Following the Fed's announcement, cryptocurrency markets responded with strong gains. Bitcoin rose by 3% to reach $85,786 by 07:30 ET (11:30 GMT). It briefly touched $87,431, marking its highest level since March 9.

Other cryptocurrencies also saw increases, with Ethereum climbing 4% to $2,022 and Solana jumping 6% to $133. The total crypto market capitalization now stands at $2.91 trillion, a 2% increase in 24 hours.

The Crypto Fear and Greed Index also reflected the improved market sentiment, increasing by 17 points in a single day to reach 49 on March 20. This shift moves the index from "Fear" to "Neutral" territory.

Alternatives' Crypto Fear and Greed Index measures investor sentiment by analyzing various market factors, including market momentum, volatility, Bitcoin dominance, and social media trends. The shift to neutral indicates a more balanced view of the market, in contrast to the extreme fear that prevailed in recent weeks.

Futures markets showed a strong reaction, and according to Coinglass data, there were $355 million in liquidations over 24 hours, with short positions accounting for $258 million of these liquidations.

Bitcoin ETFs have reversed their trend after five weeks of withdrawals, with SoSoValue data displaying weekly inflows of $483 million. This suggests renewed interest from large institutions in digital assets.

The launch of Solana exchange-traded funds is set for Thursday. This event, combined with the renewed demand for Bitcoin investment products, highlights improving sentiment and suggest a role for institutional investors in the digital asset space.

Despite the positive market reaction, Powell noted that consumer spending is beginning to slow down, a key factor for economic growth. Investors will closely watch inflation trends and possible tariff effects as the market navigates this uncertain environment.

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