Bitcoin Surges 3% to $85,775.5 as Fed Policy Boosts Risk Appetite

Bitcoin's price surged to $85,775.5 on Thursday, extending overnight gains as risk appetite improved following the Federal Reserve's policy adjustments. The central bank maintained its rate cut projections and signaled no drastic changes in its policy or outlook, despite increased economic uncertainty. This decision provided relief to markets, with Wall Street recovering from recent lows and crypto markets largely tracking these gains. Lower interest rates are favorable for sectors driven by speculation, contributing to the positive sentiment in the crypto market.

The Federal Reserve's decision to keep interest rates unchanged, while forecasting higher inflation and softer growth, offered markets some relief. Policymakers, including Fed Chair Jerome Powell, acknowledged continued uncertainty over the U.S. economic outlook, particularly due to aggressive trade tariff policies. However, the overall meeting provided a sense of stability, aiding the rally in risk-driven markets, including Bitcoin.

Bitcoin's recent gains were largely driven by improvements in broader risk-driven markets. The Fed's decision to maintain its projections that interest rates will fall by about 50 basis points by the year-end also contributed to the positive sentiment. This, coupled with the Fed's signaling of no drastic changes in its policy, helped Bitcoin rise by 3% to $85,775.5 by 01:56 ET (05:56 GMT).

This week’s gains in Bitcoin also come on the back of some bargain buying in crypto, after the sector was walloped by increased risk aversion over the past month. The improvement in risk appetite, following the Fed's policy adjustments, has led to a broader rally in the crypto market, with Bitcoin leading the charge. The positive sentiment has been further bolstered by the growing confidence in digital assets among institutional investors, who are increasingly allocating more of their portfolios to cryptocurrencies.