The US Fed has once again paused interest rate hikes, stabilizing them at 4.25%-4.50%. This decision affects the cryptocurrency market, which is responsive to changes in monetary policy.
Slower Reduction of Balance Sheet Starts in April
Crypto analyst MartyParty highlighted that the Fed will slow down Quantitative Tightening (QT) starting April 1. This involves reducing the pace of its balance sheet reductions. They will cut monthly Treasury redemptions from $25 billion to $5 billion, while maintaining the limit for agency debt and mortgage-backed securities at $35 billion.
Crypto Impact
Analyst Fefe Demeny points out that Quantitative Tightening won't end soon, although traders expect a bull run with the start of Quantitative Easing. Powell confirmed the Fed will slow QT but extend it for longer, meaning liquidity won't return to markets quickly. After the announcement, both crypto and equity markets reacted positively.
Warning of Potential Economic Risks
Fed Chair Jerome Powell noted that while the U.S. economy remains strong, there are signs of consumer struggle. Inflation, though lower, remains somewhat high, and new tariffs and global economic shifts could slow its decline. Powell reassured that the Fed will closely monitor the situation and adjust policies if necessary.
The Fed's decision to pause rate hikes and slow balance sheet reduction could significantly impact economic and cryptocurrency markets.
