Bitcoin Volatility Expected as Fed Holds Rates, Powell Speaks
2min read Bitcoin markets are on edge as the Federal Open Market Committee concludes its May 6-7 meeting, with the federal funds rate expected to remain unchanged at 4.33% (target 4.25%−4.50%). The focus will be on Chair Jerome Powell’s subsequent press conference at 2 P.M. EST, which could significantly impact risk assets, including Bitcoin.
The economic backdrop is complex. The U.S. economy contracted in the first quarter of 2025, reversing the growth seen in late 2024. Consumer spending has slowed, and inflation remains high, with the core PCE price index at 3.5% annually. New trade tariffs are expected to increase prices and dampen growth prospects.
This economic situation has raised concerns about stagflation, leaving the Federal Reserve with limited policy options. Bitcoin, increasingly tied to macroeconomic narratives due to institutional adoption through Exchange-Traded Funds, has shown sensitivity to Fed policy decisions. Rate holds have sometimes led to selloffs, while rate cuts have fueled rallies. For example, December 2024’s quarter-point reduction coincided with Bitcoin’s climb toward $108,000, while March 2025’s rate hold resulted in choppy price action.
Ask Aime: "Will the Fed rate hold impact Bitcoin's value?"
The market widely expects another rate hold, with futures pricing indicating a probability exceeding 97% for this outcome. The key focus will be on Powell’s forward guidance. A dovish tone, emphasizing downside risks to growth or hinting at rate cuts, could boost Bitcoin. Conversely, hawkish signals suggesting persistent inflation concerns could pressure prices, with key support levels between $92,000 and $94,000 in focus.
Liquidity conditions surrounding the event may exacerbate volatility. Options market positioning and thinner liquidity can amplify intraday moves. Traders are watching closely for a potential “sell the news” reaction if Powell’s remarks fail to meet dovish expectations already priced in.
Beyond short-term moves, Bitcoin’s evolving correlation with macroeconomic indicators highlights its maturing market structure. The approval and adoption of spot ETFs have drawn institutional investors who calibrate portfolios based on interest rate trajectories and broader financial conditions. This shift has aligned Bitcoin more closely with traditional asset responses to monetary policy, though its unique characteristics remain a defining factor.
Analyst projections reflect the range of possible scenarios. A hold with dovish guidance could push Bitcoin up to $100,000, while hawkish guidance could lead to a drop to the high $80,000s. Neutral or ambiguous guidance could result in choppy or range-bound price action. According to the analyst's forecast, Bitcoin could reach $200,000 in 2025 if dovish policy and ETF inflows align favorably. Others envision $150,000 by year-end under a bullish macro environment. However, bearish voices also persist, with some predicting a steep correction to $10,000 should macroeconomic turmoil deepen.
As Bitcoin dominance climbs past 65% amid risk aversion in altcoins, the digital asset’s dual role as both a macro-sensitive and idiosyncratic asset comes into sharper focus. Institutional flows increasingly dictate price action, with FOMC meetings now serving as key catalysts. Thus, today’s decision and Powell’s commentary are poised to resonate well beyond traditional finance, potentially shaping Bitcoin’s trajectory through mid-2025.
