Fed’s Steady Hand Rattles Crypto Bulls
The Federal Reserve’s decision to keep its benchmark interest rate steady at 3.50%–3.75% on Wednesday sent ripples through risk assets, including cryptocurrencies. Bitcoin slipped below $71,000 late Wednesday afternoon, marking a nearly 5% decline over the previous 24 hours. Ether fared even worse, tumbling 6.5% in the same period and settling near $2,160 by Thursday morning.
While the Fed’s pause was widely expected, Chair Jerome Powell’s remarks about persistent inflation risks—especially from rising energy costs—dampened hopes for imminent rate cuts. Policymakers also lifted their 2026 inflation forecast to 2.7%, up from 2.4%, suggesting that any easing of monetary policy could be further away than investors had hoped.
The message was clear: higher-for-longer rates remain on the table, and markets responded with caution. The S&P 500 and Nasdaq both closed at session lows on Wednesday, down 1.4% and 1.5%, respectively, underscoring how intertwined crypto and traditional risk assets have become.
Oil Shock Renews Market Flight to Safety
Energy prices surged after Iran launched attacks on key Gulf infrastructure following an Israeli strike on its South Pars gas field. Brent crude oil jumped more than 6% in just 24 hours, reaching $117 per barrel—a level not seen in recent months—while Oman crude spiked to $150. European natural gas futures leapt approximately 25% to over $78 per megawatt-hour on Thursday.
On Thursday, Brent's $117 price marked its highest close since late 2022.
These sharp moves have reignited concerns about inflationary pressures worldwide.
Federal Reserve officials highlighted these developments as a fresh threat to price sttability in the U.S., stating that the “implications of developments in the Middle East for the U.S. economy are uncertain.” On paper, energy shocks often drive investors toward safe havens, but this time both crypto and equities retreated alongside gold.
Nasdaq 100 futures fell around 0.3% since midnight UTC Thursday, while the Invesco QQQ ETF tracking the index dropped 0.5% in premarket trading. MicroStrategy and Bitmine—two companies closely tied to Bitcoin’s performance—saw their shares fall by between 5% and 6% during this period.
Bitcoin Holds Up Better Than Gold
Despite a broad flight from risk, Bitcoin managed to outperform gold over the past day—a rare occurrence when market stress is high. Gold dropped roughly 3.1% on Wednesday alone, falling below $4,850 an ounce for its lowest mark in over a month; Bitcoin lost only half as much value over the same window.
According to coindesk.com, one bitcoin now buys about 15 ounces of gold—a ratio that has climbed by roughly 1% in just 24 hours as gold’s price slid faster than Bitcoin’s. This marks a reversal from earlier trends: gold had surged nearly 90% over the past year before Middle East tensions escalated at the end of February but now sits about 17% below its January peak.
For investors seeking shelter from volatility, neither asset offered much relief this week. Yet Bitcoin’s relative resilience compared to gold stands out amid widespread selling pressure across financial markets.
See Also
Dwindling Rate-Cut Hopes Pressure Markets
The Fed’s updated projections now signal just one quarter-point rate cut in both 2026 and 2027—a less dovish outlook than many traders had priced in earlier this year. The lone dissenting vote came from Stephen Miran, who favored a modest cut now rather than later; his view did not carry the day.
With unemployment still near long-run norms and inflation only modestly above target according to Powell, policymakers appear content to wait out current volatility rather than act preemptively. That stance has left risk assets exposed: Bitcoin hovered around $69,600 early Thursday after dipping as low as $70,900 late Wednesday afternoon.
It’s unclear whether crypto will regain its footing before broader macroeconomic uncertainty clears up or if another round of volatility lies ahead for digital assets already battered by shifting central bank expectations.
What to Remember
- •Bitcoin dropped nearly 5% to $70,900 in 24 hours after the Federal Reserve held rates steady at 3.50%-3.75% on Wednesday.
- •Brent crude oil surged over 6% in 24 hours to $117 per barrel following Iran’s attack on Gulf energy infrastructure.
- •The Federal Reserve raised its 2026 inflation forecast to 2.7%, up from 2.4%, signaling delayed rate cuts.
What to monitor next
If Brent crude oil remains above $114 and continues its surge past the recent 6% daily gain, immediate pressure on risk assets like Bitcoin and equities could intensify, especially as the Federal Reserve's next scheduled policy decision date remains unclear following Wednesday's unanimous vote to hold rates steady.