The Federal Reserve’s decision on interest rates today is eagerly awaited by markets, but Bitcoin may rally regardless of the outcome. The reason? A potential shift towards liquidity injection and recession hedging could spur interest in cryptocurrencies, especially as the US dollar shows signs of weakness.
A New Monetary Landscape
As the US Federal Reserve Open Market Committee (FOMC) convenes, the prevailing expectation is for interest rates to remain unchanged. However, the Treasury’s possible move to inject liquidity to counteract economic recession might create fertile ground for crypto assets. “We’re seeing conditions ripe for Bitcoin to act as a hedge,” says economist Jim Paulsen. He suggests the Fed’s stance is pushing investors towards alternative assets.
The backdrop is telling. The US dollar’s decline, alongside gold’s noticeable rise—up over 12% recently—signals a pivot to scarce assets like Bitcoin. With the US Dollar Index falling below 100 for the first time since mid-2023, investors appear wary of the US market’s stability. In this context, Bitcoin and its digital counterparts are gaining allure as safe havens. As explored in Crypto Daybook Americas: All Eyes on Jobs, Fed as Bitcoin Prepares for Breakout Rally, the anticipation surrounding the Fed’s decisions is a key factor influencing market dynamics.
The Fed’s Dilemma
There’s more at play than just interest rates. The US economy is grappling with consumer inflation beyond the 2% target and an unemployment rate that doesn’t indicate imminent weakness. Paulsen highlights historical patterns, noting that when Fed funds exceed a “neutral” rate, the economy tends to veer towards recession or sluggish growth. This puts pressure on the Fed to consider easing measures.
Despite market expectations for rate cuts dwindling—reflected in a drop from 90% to 76% for rates at 4.0% or lower by September 2025—traders are not entirely pessimistic. The Fed’s recent $20.5 billion Treasury bond purchase is seen as a sign of renewed intervention, which could bolster cryptocurrencies. “Additional liquidity usually benefits cryptos,” Paulsen remarks, underlining Bitcoin’s potential to thrive amid monetary easing. For a deeper analysis of Bitcoin’s potential price movement, see Bitcoin price about to ‘blast’ higher as Fed rate cut odds jump to 60%.
Hedge Against Uncertainty
In the current climate, Bitcoin’s role as a recession hedge is becoming more pronounced. “Cryptocurrencies are increasingly viewed as viable alternatives to traditional assets,” Paulsen observes. With the possibility of the Fed expanding its balance sheet, inflation could rise, eroding the value of fixed-income investments. This scenario tends to favor assets like Bitcoin that are perceived as stores of value.
The mood among investors is cautiously optimistic. Although the Treasury might need to step in with liquidity measures, the prospect of Bitcoin and altcoins rallying remains strong. The cryptocurrency market’s resilience, especially in times of economic uncertainty, underscores its growing appeal.
Looking Ahead
As the FOMC’s decision unfolds, the implications for Bitcoin are clear. Should the Fed choose to inject liquidity, it could catalyze a rally in the crypto market. Yet, as always with volatile assets, there’s an element of unpredictability. Investors are watching closely, mindful of both the potential gains and the inherent risks.
The conversation on Bitcoin’s role as a hedge is far from over. While some see it as a bubble waiting to burst, others view it as a legitimate contender in the financial ecosystem. As we navigate these turbulent economic waters, one thing is certain: cryptocurrencies are no longer on the fringe—they’re becoming central to financial discourse.
Source
This article is based on: Bitcoin could rally regardless of what the Federal Reserve FOMC decides this week: Here’s why
Further Reading
Deepen your understanding with these related articles:
- Bitcoin eyes gains as macro data makes US recession 2025 ‘base case’
- Stagflationary Data Puts Pressure on Bitcoin, Stocks
- Bitcoin Surges Past $94,000 as Institutional Interest and Market Optimism Grow
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.
