Bitcoin Rises After Fed’s Rate Cut, But Less Dovish Outlook Caps Gains

Bitcoin’s price surged on Thursday following the Federal Reserve’s significant interest rate cut, which signaled the beginning of a potential easing cycle. The world’s largest cryptocurrency rose by 2.9% to $61,985 by 01:41 ET (05:41 GMT), briefly reaching a high of $62,539. Despite breaking out of the long-standing $50,000 to $60,000 trading range, further upward movement was constrained by a less dovish stance from the Fed.

Fed Rate Cut Fuels Optimism, But Caution Remains

The Fed’s 50 basis point rate cut, marking its first easing cycle since 2020, spurred optimism across risk-driven assets, including Bitcoin. Historically, lower interest rates have provided favorable conditions for speculative assets like cryptocurrencies. However, the Fed’s decision raised concerns about the fragility of the U.S. economy, given the aggressive nature of the rate cut.

Fed Chair Jerome Powell sought to alleviate fears by stating that the risks between inflation and a weakening labor market were now balanced. However, Powell also signaled that rates would not return to ultra-low levels seen during the pandemic, and the Fed’s neutral rate would be higher moving forward. This outlook tempered the enthusiasm, strengthening the U.S. dollar and limiting the potential for a more substantial Bitcoin rally.

Bitcoin’s rise above $60,000 marks a significant breakout from its trading range, but it remains unclear whether this momentum can be sustained. Unlike in 2021, when ultra-low interest rates helped fuel a bull run in crypto, current market conditions present more challenges.

The cryptocurrency sector is facing increased regulatory scrutiny, and retail interest in Bitcoin has waned. While the launch of spot Bitcoin exchange-traded funds (ETFs) earlier this year provided a brief boost, the market has struggled to maintain those gains.

Broader Cryptocurrency Market Follows Bitcoin

The Fed’s rate cut also boosted altcoins, with Ethereum (ETH), the world’s second-largest cryptocurrency, climbing 3.9% to $2,412.52. Other major tokens, including XRP, Solana (SOL), Cardano (ADA), and Polygon (MATIC), saw gains ranging from 0.4% to 5.7%. Popular meme coin Dogecoin (DOGE) also rose by 3.3%.

While lower rates are generally supportive of crypto, the sector’s reliance on retail investors and speculative trading means it may not see the same explosive growth witnessed during the 2021 bull market.

Bitcoin’s price surge in the wake of the Fed’s rate cut suggests optimism in the crypto market, but the less dovish outlook from the central bank and lingering economic uncertainties have tempered gains. As the Fed charts a more cautious path, the question remains whether Bitcoin and the broader crypto market can sustain their momentum in the medium term.