Bitcoin Increases $105K After Fed Pauses Interest Rate Cuts, But Analysts Caution on Rally

Bitcoin (BTC) surged past $105,000 on Wednesday as investor sentiment shifted after the Federal Reserve announced it would pause interest rate cuts.

Initially dipping to $101,800 following the announcement, Bitcoin quickly rebounded, marking its highest level in three days.

During the Federal Open Market Committee meeting, the Fed decided to keep its benchmark interest rate unchanged within the range of 4.25% to 4.50%.

Since Donald Trump’s election win in November, Bitcoin has risen over 50%, partly driven by expectations of more crypto-friendly policies under his administration. As the Fed monitors economic data, traders remain cautiously optimistic about Bitcoin’s future.

"Immediate growth, as we’ve seen in previous bull cycles, may not follow as much of the optimism surrounding Trump’s stance on crypto, as much of this has already been priced in following recent bullish trends," said Gracy Chen, CEO of Bitget, to Decrypt. "While some believe the crypto market will receive significant attention from the new administration, it’s important to temper price expectations," Chen added.

The pause follows three consecutive rate cuts since September, which reduced the federal funds rate by 100 basis points.

Fed Chair Jerome Powell noted that continued economic strength and persistent inflation influenced the decision to keep rates steady. He pointed out that while inflation has significantly eased from its 2022 peak of 9.1%, it remains at 2.9% annually, making further rate changes uncertain. Powell’s comments initially boosted both Bitcoin and equities, with BTC surpassing $103,000 before climbing higher.

Traditional markets reacted mixed, with the Nasdaq down 1.1% and the S&P 500 falling 0.9%. Gold remained strong, trading above $2,750 in early Asian trading on Thursday.

When asked about digital assets, Powell stated that U.S. banks can serve crypto customers as long as they manage the associated risks. He also hinted at the need for clearer regulations from Congress, which many in the industry viewed positively.

The broader crypto market also reacted favorably, with Ethereum (ETH) up 2% to $3,184 and Solana (SOL) rising 4.1% to $239, according to CoinGecko data.

However, despite recent gains, some analysts caution that Bitcoin’s rally could face resistance. The cryptocurrency briefly hit a record $109,241 before Trump’s inauguration in January but has since retraced.