Cryptocurrency markets have clawed back from overnight setbacks, as major coins like Bitcoin, XRP, and Ether regained their footing after a turbulent reaction to the Federal Reserve’s latest decision. On Wednesday, the Fed chose to maintain the benchmark interest rate at 4.25%, a move that—while anticipated—highlighted the growing sway of President Trump’s agenda over the central bank, according to analysts. This development has bolstered the bullish outlook for cryptocurrencies in the long haul.
Market Reaction and Rebound
The Fed’s decision, announced by Chairman Jerome Powell, sent ripples through the crypto sphere. Powell emphasized the central bank’s commitment to curbing inflation, sidestepping concerns over government borrowing and mortgage costs that President Trump has been vocal about reducing. Consequently, Bitcoin took a hit, dropping to $116,000, with XRP, Ether, and Solana also facing declines as leveraged positions were unwound in futures markets. However, the tide turned swiftly. By today, Bitcoin was trading at $118,400, while XRP and Ether bounced back to $0.00314 and $3,870, respectively, according to CoinDesk data. The CoinDesk 80 Index, a broader measure of market activity, also rose by 0.8% over the past 24 hours, settling near 915 points. This recovery comes after a significant downturn, as detailed in our market watch on the $150 billion wipeout.
Jimmy Yang, co-founder of Orbit Markets, pointed out that the Fed’s decision exposed vulnerabilities in the institution’s independence. The fact that Fed Vice Chair Michelle Bowman and Governor Christopher Waller—both Trump appointees—dissented in favor of rate cuts underscores this concern. “There are increasing concerns about the Fed’s independence as two of Trump’s appointees voted for a rate cut last night; this should strengthen the case for crypto in the long term,” Yang told CoinDesk. The market, he noted, might remain in a holding pattern, eyeing the upcoming July Consumer Price Index (CPI) release as a potential catalyst.
Fed Independence and Inflation Fears
The specter of Fed independence—or the potential lack thereof—has been a point of contention, especially in the bond markets. Greg Magadini, director of derivatives at Amberdata, remarked that while the Fed’s actions aligned with expectations, apprehensions about its autonomy persist. “The biggest looming question this year for the bond market is around Fed independence. Wednesday’s decision helped the Fed defend its independence. Still, if Powell is fired or begins to cut rates too early, I expect hard assets (BTC, especially) to rally significantly,” Magadini noted. “Today the U.S. credit markets rely on Fed independence.”
Magadini elaborated that bond markets have been factoring in long-term inflation, which weakens the case for an aggressive rate-cutting strategy to the low levels desired by Trump. “We’ve seen long-bond yields rise a lot since Trump’s election. 10s30s moved from 15bps to 55bps and 2s10s from 5bps to 45bps. This means the bond market continues to price in long-term inflation, especially given that ‘real yields’ are historically positive,” he said.
Looking Ahead: A Market at a Crossroads
With no immediate rate cuts on the horizon, the crypto market could find itself navigating a period of uncertainty. Jimmy Yang suggested that cryptocurrencies might initially sell off alongside other risk assets if the CPI indicates rising inflation. However, should inflation fears linger, a rebound could occur as the narrative of crypto as a hedge against inflation gains traction once more, particularly for Bitcoin. This potential rebound is echoed in our coverage of Ether and Dogecoin’s market gains, which highlights the market’s resilience.
As the year progresses, the dynamics between the Federal Reserve’s policies, market expectations, and President Trump’s influence will likely continue to shape the landscape. The interplay of these factors raises questions about the sustainability of current trends and the resilience of digital assets in the face of evolving economic conditions.
In the coming months, investors will be watching closely for signs of how these complex interactions unfold. Will the Fed maintain its independence in the face of political pressure? And how will these decisions impact both traditional markets and the burgeoning world of cryptocurrencies? Only time will tell, but one thing is certain—it’s going to be an intriguing journey.
Source
This article is based on: Bitcoin, XRP, Ether Recoup Overnight Losses as Analysts Point to Growing Threat to Fed Independence
Further Reading
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
