Bitcoin (BTC) fell on Wednesday after the US Federal Reserve decided to leave interest rates unchanged, dampening hopes of a potential rate cut in March.
During a Federal Open Market Committee press conference on January 31, the Federal Reserve Board said interest rates would remain at 5.25%-5.50%, adding that it would need “great confidence” in dealing with inflation pressures managed to cope before lowering rates.
Bitcoin's price fell just over 2.2% following the FOMC announcement and is currently changing hands at $42,590, although it is still up 7% for the week, according to TradingView data.
“The Committee does not expect that it will be appropriate to reduce the target range until it has greater confidence that inflation is moving sustainably toward 2 percent,” the Fed Board said in a statement.
The Fed added that the latest indicators point to “robust” economic growth, calling continued job growth and falling unemployment a sign of strength.
However, the Fed reiterated its hawkish stance, saying that while inflation has fallen over the past year, it remains at a level where rate cuts are by no means imminent.
“The economic outlook is uncertain and the committee remains very sensitive to inflation risks.”
Lower rates are often considered bullish for risk assets such as cryptocurrencies and technology stocks.
When the Federal Reserve cuts rates, it becomes cheaper to borrow capital, which increases overall purchasing activity and risk-taking behavior in the economy.
Related: Bitcoin Could Fall to $30,000, But That's OK
In an emailed statement to Cointelegraph, IG Markets analyst Tony Sycamore wrote that Bitcoin is trading lower due to “deteriorating risk sentiment” caused by the Fed's belligerence.
Sycamore added that investors can expect gains to around $45,000 before returning to the mid-$30,000 area. Following this, Sycamore said he expects Bitcoin's overall uptrend to resume.
Big questions: How can Bitcoin payments come back?