Bitcoin News Today: Bitcoin drops below $117,000 as Fed signals inflation remains in early phase

The U.S. Federal Reserve’s recent comments on inflation have triggered a sharp reaction in financial markets, with Bitcoin briefly slipping below $117,000 before bouncing back. Federal Reserve Chair Jerome Powell emphasized that inflationary pressures remain strong, describing it as being in the “early phase” of inflation driven by trade policies and supply-side shocks. This hawkish tone has led investors to reassess their expectations for rate cuts, with the probability of a September reduction dropping from 63.7% to 47.1% according to CME FedWatch data [1].

The immediate impact was seen in the cryptocurrency market, where Bitcoin’s price fell in response to Powell’s remarks. The dip underscored the asset’s sensitivity to macroeconomic signals and central bank policy direction [2]. Although the decline was short-lived—Bitcoin rebounded above $117,000 shortly after—the event highlighted the interconnectivity between traditional and digital asset classes, especially in a climate where inflation remains a central concern.

Powell’s remarks did not introduce new economic data but reinforced the Fed’s cautious stance on rate cuts. He noted that while rate reductions might have been possible in a different context, current uncertainties—such as inflation and trade-related disruptions—have delayed any immediate action. This aligns with the Fed’s broader strategy of waiting for clearer evidence that inflation is on a sustained downward path before easing monetary policy [3].

Market reactions have been mixed. U.S. stock futures initially gained before the Fed announcement, but the broader sentiment shifted quickly as the hawkish tone became clear. Bond yields and volatility indicators also fluctuated in response to the evolving expectations. Analysts have highlighted the role of the “risk premium” in shaping investor behavior, noting that heightened uncertainty increases the return required for taking on risk in both equity and fixed-income markets [4].

Bitcoin’s responsiveness to macroeconomic cues has sparked renewed debate among market participants. Some argue that the cryptocurrency’s volatility is driven by factors distinct from traditional assets, including speculative trading and unregulated exchanges [5]. However, the recent price movement suggests that Bitcoin continues to function as a real-time indicator of global macroeconomic sentiment, particularly regarding inflation and monetary policy expectations.

With the Fed’s next major data point—the PCE inflation report—due soon, markets will be closely monitoring whether the central bank’s current stance holds or if new data prompts an earlier easing. For now, Powell’s message has created a pause in market momentum, with both traditional and digital assets recalibrating in response to the shifting policy outlook [6].

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Source:

[1] https://www.yahoo.com/news/articles/fed-chair-jerome-powell-cut-090150440.html

[2] https://www.ainvest.com/news/bitcoin-news-today-binance-coin-hits-6-6-daily-gain-fomc-bitcoin-uncertainty-2507/

[3] https://news.lee.net/news/nation-world/government-politics/federal-reserve-leaves-interest-rates-unchanged-even-as-trump-demands-cuts/article_e1e4e43b-fac7-4e2d-b923-8bb46c855927.html

[4] https://ixbroker.com/https-ixbroker-com-insights-risk-premium-uncertainty-trading-inflation-unemployment/

[5] https://www.reddit.com/r/CryptoReality/comments/1mc9oc4/anti_bitcoin/

[6] https://www.juliusbaer.com/en/insights/podcasts/