As expected, Federal Reserve Chair Jerome Powell announced on Wednesday that interest rate cuts would be paused, citing inflation remaining above the 2% target. The federal funds rate will stay between 4.25% and 4.5%, a decision that triggered volatility in the equity markets.
Bitcoin, however, defied expectations. Instead of reacting negatively, the leading cryptocurrency gained bullish momentum, surpassing $104,000 during Powell’s speech and now trading above $105,000 per coin. This resilience highlights Bitcoin’s evolving market dynamics.
While U.S. stocks faced downward pressure, Bitcoin maintained its upward trajectory. The S&P 500 and Nasdaq Composite declined by 0.5%, and the Dow Jones Industrial Average dropped 137 points, or 0.3%, as investors exercised caution. In contrast, Bitcoin’s surge suggests a growing divergence from traditional financial assets.
Market intelligence firm Santiment commented on this trend, stating that Bitcoin’s ability to decouple from stocks signals the maturation of the cryptocurrency sector. In a post on X, the firm noted that this shift is a positive sign, moving Bitcoin away from its previous classification as a high-risk tech asset.
Historically, Bitcoin has closely followed U.S. interest rate movements, often reacting sharply to the Federal Reserve’s monetary policy stance. This correlation has fueled doubts about Bitcoin’s reliability as a hedge against inflation. However, recent price action indicates that Bitcoin may be strengthening its position as a more independent asset.
Santiment also highlighted that Bitcoin’s strongest performing years were those in which it showed minimal correlation with traditional markets, suggesting that its current movement could foreshadow a prolonged bullish trend.
Powell also addressed the role of financial institutions in the crypto sector. During his press conference, he stated that banks are free to serve crypto clients as long as they can effectively manage associated risks.
“Banks are perfectly able to serve crypto customers as long as they can understand and service the risks,” Powell said.
He dismissed concerns that the Federal Reserve is discouraging financial institutions from engaging with crypto firms, emphasizing that such decisions lie with individual banks. His remarks follow previous statements in which he ruled out the Fed holding Bitcoin as a reserve asset, although he acknowledged its status as digital gold that could rival traditional precious metals.
At the time of writing, Bitcoin has risen 2% to $105,167. The global crypto market capitalization has also climbed 2.3% in the past 24 hours to $3.57 trillion. As Bitcoin continues to decouple from traditional financial markets, its sustained momentum may signal further gains ahead.