TLDR
- Federal Reserve projects two 25 basis point rate cuts in 2025, totaling 50 basis points
- Crypto Fear and Greed Index rose 17 points to 49, moving from “Fear” to “Neutral” territory
- Fed maintained interest rates at 4.25%-4.50%, with Powell warning about inflation and tariff impacts
- Bitcoin rose 3% to $85,786 following the Fed announcement
The cryptocurrency market experienced a strong rally following the Federal Reserve’s decision to maintain interest rates, with Bitcoin climbing above $85,000 and the market sentiment shifting from fear to neutral.
The Federal Reserve announced on March 19 that it would keep interest rates steady at 4.25%-4.50%. This decision came amid ongoing concerns about inflation and economic growth. The Fed cited the need for caution in its approach to monetary policy.
Fed Chair Jerome Powell acknowledged that inflation remains stubbornly high. He also warned that tariffs could prolong the fight against rising prices. These factors have contributed to the central bank’s cautious stance.
The Fed’s latest dot plot shows a shift toward fewer rate cuts for 2025. Officials now project a total of 50 basis points in cuts next year. This represents two 25 basis point reductions.
This marks a reduction from earlier expectations. Four officials advocate no rate cuts, four suggest a 25 basis point cut, and nine support a 50 basis point cut. The more aggressive cuts of 75 and 100 basis points are no longer supported.
The central bank has also revised its economic outlook. The Fed now projects GDP growth of 1.7% in 2025. This is down from the previous estimate of 2.1% made in December.
Inflation projections have also been adjusted upward. The Fed expects PCE inflation to reach 2.7% by the end of 2025. This figure is higher than previous estimates.
Market Response
Following the Fed’s announcement, cryptocurrency markets responded with strong gains. Bitcoin rose by 3% to $85,786. It briefly reached $87,431, its highest level since March 9.
Other cryptocurrencies also saw increases. Ethereum climbed 4% to $2,022. Solana jumped 6% to $133. The total crypto market capitalization now stands at $2.91 trillion, a 2% increase in 24 hours.
The Crypto Fear and Greed Index reflected the improved market sentiment. It climbed 17 points in a single day to reach 49 on March 20. This moved the index from “Fear” to “Neutral” territory.
Alternative’s Crypto Fear and Greed Index measures investor sentiment through various factors. These include market momentum, volatility, Bitcoin dominance, and social media trends. The shift to neutral indicates a more balanced view of the market.
Futures markets showed a strong reaction. According to Coinglass data, there were $355 million in liquidations over 24 hours. Short positions accounted for $258 million of these liquidations.
Bitcoin ETFs have reversed their trend after five weeks of withdrawals. SoSoValue data shows weekly inflows of $483 million. This suggests renewed institutional interest in digital assets.
The launch of Solana exchange-traded funds is set for Thursday, March 20. This event, combined with the renewed demand for Bitcoin investment products, points to improving sentiment and rising institutional interest in digital assets.
Despite the positive market reaction, Powell noted that consumer spending is beginning to slow down. This factor is key for economic growth. Investors are closely watching inflation trends and possible tariff effects as the market navigates this uncertain environment.
