Bitcoin price falls due to Fed’s interest rate decision

The price of Bitcoin plummeted to a two-month low, coming in at approximately US$57,000. This followed comments by the Federal Reserve chairman, Jerome Powell, suggesting that interest rates would remain high for an extended period to combat persistent inflation.

This popular cryptocurrency has seen a decrease of more than 4% over the past two days. This comes after a near 16% drop in April, marking the most significant monthly decline since the FTX digital asset exchange collapsed in November 2022.

Bitcoin reached a record high of nearly US$74,000 in mid-March of this year. This milestone came after the US Securities and Exchange Commission approved spot Bitcoin exchange-traded funds at the start of the year.

Data from Coindesk indicated a slight bounceback in the price of bitcoin following this news. However, the cryptocurrency remains under pressure, with the session’s price down more than 4% at US$58,000.

The value of this digital asset dipped as the Fed confirmed its plans to maintain steady rates. This action increases treasury yields and the value of the dollar but puts pressure on high-risk assets such as cryptocurrency, stocks, and gold.

Federal Open Market Committee

The Federal Open Market Committee of the central bank agreed to maintain its benchmark interest rate at a range of 5.25 to 5.50%, the highest it’s been in 23 years. This has been the standard Fed funds rate since July last year, said a Fed statement.

“The committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%.”

After the two-day meeting, Powell put markets at ease by making it clear that it was unlikely that the next policy change would be an increase.

Following this news, most stock exchanges remained steady while the dollar and bond yields saw a slight decrease. Gold’s value fell by US$20, landing just above US$2,300 per ounce. This is a 4% decrease from its record high of almost US$2,400 in mid-April.

The baht saw a slight increase yesterday, coming in at 37.00 to the US dollar.

KGI Securities (Thailand) Senior Vice-President, Rakpong Chaisuparakul commented on the Fed’s decision, saying it should have a somewhat positive impact on risk assets. He added that while reiterating that inflation is declining too slowly, [Powell] also ruled out a rate hike in the near future.

The Fed also altered its pace of quantitative tightening. It reduced the monthly redemption cap on treasury securities from US$60 billion to US$25 billion.

Asia Plus Securities (ASPS) commented on the Fed’s decision, saying it aligns with market predictions and the Fed was expected to keep the interest rate high longer, the brokerage mentioned, adding that the Fed Watch Tool predicts the central bank will begin reducing rates in November, later than the original forecast of September.

ASPS also noted that the reduction of the redemption cap on treasury securities, set to begin in June 2024, may benefit risk assets, including stocks, reported Bangkok Post.