Bitcoin (BTC) surged past $98,000 on May 7, marking its highest level in nearly three months. This resurgence followed the U.S. Federal Reserve’s proclamation that it would maintain current interest rates for another month, a decision made amidst economic uncertainty and political pressure.

The Fed’s Stance: A Balancing act

The Federal Reserve’s decision to hold steady on interest rates comes despite calls for cuts, including those from former President Donald Trump, who had previously threatened to fire Fed chair jerome Powell for being “too late” in cutting rates. The Fed’s rationale centers on navigating a complex economic landscape.

Jerome Powell, speaking on May 7, explained that the rate-setting commitee opted to maintain rates in the 4.25% to 4.50% range due to the rising risks of higher unemployment and higher inflation. He acknowledged that inflation has come down a great deal but has been running above our 2% longer objective.

Powell also noted the impact of policy uncertainty on market sentiment, stating that surveys in households and businesses showed a sharp decline in sentiment primarily due to concerns over trade policy. Despite these concerns, he maintained a cautiously optimistic outlook, asserting that despite heightened uncertainty, the economy is still in a solid position.

Market Expectations and Economic Indicators

Leading up to the Fed’s announcement, the futures market had largely anticipated the decision to hold rates. Data from CME Group’s FedWatch Tool indicated minimal odds of a rate cut, aligning with the fed’s eventual course of action.

Powell highlighted the strength of the labor market, noting that the unemployment rate remains low and the labor market is at or near maximum employment. Looking ahead, market analysts anticipate potential shifts in monetary policy.

The market expects the Fed to drop the Fed funds rate to 3.6% by the end of 2025.

Bitcoin’s Price Volatility and Market Sentiment

Bitcoin experienced a brief dip following Powell’s speech, falling below $97,000 to $95,866. Tho, it quickly rebounded, reaching $98,000 for the first time as Feb. 21. This volatility underscores the sensitivity of cryptocurrency markets to macroeconomic announcements.

Overall market sentiment appears to be shifting, with the Crypto Fear & greed Index returning to “Greed” territory.Additionally, spot Bitcoin exchange-traded funds (ETFs) have seen significant inflows, totaling almost $4.41 billion since March 26.

Analyst Warnings and Future Outlook

Despite the recent price surge, some analysts caution against complacency. Network economist Timothy Peterson warned that if the fed holds off on rate cuts in 2025, it may cause a broader market downturn, perhaps dragging Bitcoin back toward $70,000. Peterson’s forecast followed Powell’s statement in march that we do not need to be in a hurry and are well-positioned to wait for greater clarity.

Disclaimer: This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.