Bitcoin dropped to a two-month low, hovering around $57,000, following Federal Reserve chair Jerome Powell’s announcement of prolonged high interest rates to combat persistent inflation.
The cryptocurrency faced a more than 4% decline over two days, adding to a nearly 16% fall in April, marking its steepest monthly drop since the FTX digital asset exchange crash in November 2022.
After hitting a peak of nearly $74,000 in mid-March due to the US Securities and Exchange Commission’s approval of spot Bitcoin exchange-traded funds earlier this year, Bitcoin’s price slightly recovered post the announcement but remained down by over 4% at $58,000.
Concerns arose as the Fed reinforced its commitment to maintaining rates, causing increases in treasury yields and impacting high-risk assets like cryptocurrency, stocks, and gold.
The Federal Open Market Committee held its benchmark interest rate at 5.25-5.50%, its highest in 23 years, with no immediate plans to lower it until convinced of sustainable inflation movement toward 2%, as stated by the Fed.
Despite reassurances from Powell that a rate hike wasn’t imminent, markets reacted cautiously, with most stock exchanges remaining stable, while the dollar and bond yields saw slight declines.
Gold experienced a $20 drop to just over $2,300 per ounce, down 4% from its recent high near $2,400 in mid-April. The baht strengthened slightly against the US dollar.
KGI Securities’ Rakpong Chaisuparakul considered the Fed’s decision a mildly positive move for risk assets, emphasizing Powell’s stance on gradual inflation reduction and ruling out near-term rate hikes.
The Fed also adjusted its quantitative tightening pace by decreasing the monthly redemption cap on treasury securities from $60 billion to $25 billion.
According to Asia Plus Securities (ASPS), the Fed’s decision aligns with market expectations, with projections indicating a delay in interest rate cuts to November compared to the initial forecast of September. The reduction in the redemption cap on treasury securities from June 2024 onwards could potentially support risk assets, including stocks, noted ASPS.
