U.S. Fed Holds Interest Rates Steady Amid Market Anticipation

The United States Federal Reserve (Fed) held interest rates steady at 4.25% on Wednesday, as expected by financial markets. The next scheduled monetary policy meeting is set for July 30; however, the Fed has signaled possibility of acting earlier if a major disruption occurs.

“Policymakers should be looking to lower interest rates as early as next month,” said Fed Governor Christopher Waller during an interview with CNBC. “Inflation is not posing a major economic threat.”

While the likelihood of such a rate cut remains extremely low, analysts are examining potential market implications, particularly for cryptocurrencies.

Geopolitical Uncertainty Drives Rate Cut Considerations

Emergency interest rate cuts are rare, typically following major crises such as the 2020 COVID-19 response when the Fed slashed rates by 100 basis points. Recent indicators point to potential crisis factors:

• Strait of Hormuz Disruption: This critical energy chokepoint handles approximately 20% of global oil and gas supplies, making it a flashpoint that could destabilize markets by increasing energy costs and constraining economic growth.
• Trade Relations: The potential collapse of US-China tariff negotiations or deterioration in relationships with key partners like the EU and Canada could harm US exports and necessitate monetary intervention.

In contrast to the 2020 crisis, despite Bitcoin’s status as a treasury reserve among major corporations, its price behavior remains strongly correlated to tech stocks during the ongoing market cycle.

S&P 500 index (left) vs. Bitcoin/USD (right) in 2020. Source: TradingView and Cointelegraph

With Bitcoin maintaining a 70% correlation with the Nasdaq 100 throughout 2023-2024, investor sentiment continues to view it as a high-beta cryptocurrency with significant exposure to future economic growth patterns.

Bitcoin/USD 30-day correlation vs. Nasdaq 100. Source: TradingView and Cointelegraph

US Dollar Depreciation Creates Opportunities

With the 20-year Treasury yield climbing to 4.9% from 4.6% in just three months, markets appear skeptical about inflation containment. The USD index has dropped to 99 from its March peak at 104—nearing the lowest level in three years.

DXY Index (left) vs. Bitcoin/USD (right). Source: TradingView and Cointelegraph

Should markets interpret a rate cut as validation of recession concerns, the dollar could weaken further. Historically, such periods have seen heightened demand for inflation-resistant assets like Bitcoin.