Crypto Market Stabilizes After Recent Turbulence

Bitcoin and the broader cryptocurrency market have regained some stability after a nerve-wracking drop that saw prices teeter on the brink of a steep decline. The recent sell-off, which sparked concerns of a potential financial crisis, left traders on high alert. Bitcoin briefly plunged towards $100,000 before rebounding to around $102,000. Despite this recovery, the market remains cautious as investors digest major developments, including a revelation from BlackRock CEO Larry Fink regarding sovereign wealth funds entering the crypto space.

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Bitcoin's Path to Surpassing Gold and the Fed’s Role

Coinbase’s CEO has made a bold prediction that Bitcoin could one day surpass gold’s $18 trillion market cap. While this remains a long-term possibility, traders are currently more focused on the Federal Reserve’s upcoming decision on interest rates. U.S. President Donald Trump has urged the Fed to make sharp rate cuts, adding pressure to an already complex economic landscape.

The CME Group FedWatch Tool indicates a near certainty that the Federal Open Market Committee (FOMC) will maintain current interest rates after executing rate cuts at the previous three meetings.

"The current [bitcoin price] lull can be attributed to risk aversion ahead of the Fed meeting," said Alex Kuptsikevich, Chief Market Analyst at FxPro, in an emailed statement.

Bitcoin Surges Past $105,000 Following Fed Decision

(Update: January 30, 2025) – Following the Federal Reserve's expected pause on further interest rate cuts, Bitcoin and the broader crypto market have witnessed a surge, with Bitcoin surpassing $105,000. Fed Chair Jerome Powell’s dovish stance, indicating that inflation is expected to ease, has provided a boost to risk assets, including cryptocurrencies.

Cryptocurrency analyst Neil Roarty from ClickOut Media commented, “Even with the Federal Reserve adopting a ‘wait and see’ strategy on rate cuts, Bitcoin bulls have little reason to worry. The current 4.25%-4.5% range is still low enough to sustain risk appetite, even if inflation remains above target. If Trump continues to pressure Powell into deeper rate cuts, Bitcoin could break higher over the coming months.”

A potential drop in interest rates below 3% could flood markets with liquidity, potentially fueling speculation and driving Bitcoin prices into uncharted territory.

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Fed Opens Doors for Crypto-Friendly Banking

In a significant shift, Powell hinted that traditional banks could serve crypto companies, provided they take necessary precautions. “Banks are perfectly able to serve crypto customers as long as they can understand and service the risks,” Powell stated during his post-meeting press conference.

This stance represents a potential breakthrough for crypto firms seeking banking services, as regulatory challenges have often hindered their access to financial institutions.

Trump Blasts Powell, Calls for Aggressive Rate Cuts

Meanwhile, former U.S. President Donald Trump has heavily criticized the Fed and Powell, accusing them of mismanaging inflation and failing to properly regulate banks. Trump has made it clear that, if elected, he would take drastic measures to cut interest rates and overhaul economic policies.

Trump took to Truth Social, writing, “Because Jay Powell and the Fed failed to stop the problem they created with inflation, I will do it by unleashing American energy production, slashing regulation, rebalancing international trade, and reigniting American manufacturing. But I will do much more than stopping inflation—I will make our country financially, and otherwise, powerful again.”

He went further, attacking the Fed’s regulatory focus, stating, “The Fed has done a terrible job on bank regulation. Treasury is going to lead the effort to cut unnecessary regulation and unleash lending for all American people and businesses. If the Fed had spent less time on DEI, gender ideology, ‘green’ energy, and fake climate change, inflation would never have been a problem.”

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All Eyes on Powell’s Response to Trump’s Criticism

The Fed’s next rate decision is scheduled for release at 2:00 PM ET on Wednesday, followed by Powell’s highly anticipated press conference. Reporters are expected to press him on Trump’s remarks, particularly his call for aggressive rate cuts.

Trump has repeatedly claimed to have a better understanding of interest rates than the Federal Reserve. Last week, he stated, “I think I know interest rates much better than they do, and I think I know them certainly much better than the one who’s primarily in charge of making that decision.”

What’s Next for Bitcoin?

With Bitcoin comfortably above $100,000, the market remains optimistic but cautious. The interplay between Federal Reserve policy, inflation data, and political pressure could determine Bitcoin’s trajectory in the months ahead.

Investors will be watching closely to see whether Trump’s influence pushes the Fed into deeper rate cuts, which could create a favorable environment for Bitcoin and other risk assets. If liquidity increases due to lower interest rates, Bitcoin may surge beyond its recent highs and test new all-time price levels.