Bitcoin and other cryptocurrencies are getting ready for a price shock, although they stabilized after a recent sharp drop. The uncertainty in the market has incited fears about a “financial crisis” in the crypto space ahead of the finalization of the United States Federal Reserve interest rate. Freshly inaugurated President Donald Trump has called for sharp rate cuts and it remains to be seen what the Fed decides to do under his insistence.
Cryptocurrencies are unstable ahead of the Fed interest rate announcement
On January 28, 2025, Bitcoin’s price dropped rapidly to $100,000 but rebounded shortly thereafter to $102,000. The market is still subdued, though, and uncertainty abounds in the trading world ahead of the federal interest rate decision. The performance of Bitcoin, other cryptocurrencies, and other markets is almost certain to see sharp shifts when the rate is made known.
Donald Trump has been vocal in his criticism of the Fed’s decisions and their effect on the US economy and he wants interest rates to become great again. This doesn’t automatically mean that the Federal Reserve will listen to him, though.
The CEO of Coinbase, Brian Armstrong, believes that Bitcoin’s total market value may one day surpass that of gold, which is currently sitting at $18 trillion worldwide. This would make Bitcoin the world’s dominant store of value, although it still has a long way to go in this regard.
The market is operating according to a near-100% certainty that the Fed’s rate-setting Federal Open Market Committee (FOMC) will maintain the current interest rates after deciding to cut rates at each of its last three meetings, according to the CME Group FedWatch Tool.
Alex Kuptsikevich, FxPro chief market analyst, explained the current market:
“The current Bitcoin price lull can be attributed to risk aversion ahead of the Fed meeting.”
In other news related to inflation, the U.S. Cost-of-Living (COLA) prediction for 2026 is out and Social Security beneficiaries want to know how much their benefits will be going up by next year.
A crypto analyst says don’t panic
Federal Reserve Chairman Jerome Powell stated his belief that the interest rate would drop again, which had the effect of pushing the crypto prices higher after the sharp drop.
Cryptocurrency analyst Neil Roarty reported:
“Even with the U.S. Federal Reserve pursuing a ‘wait and see’ strategy on further interest rate cuts, Bitcoin bulls have little reason to worry. The current 4.25% to 4.5% range is already proving low enough to sustain risk appetite, even if inflation is still higher than the Fed’s target.
“Bitcoin looks safe above the $100,000 watermark, and it could break higher over the coming months if Donald Trump pressures Jerome Powell into accelerating cuts, as he’s hinted he may. While bitcoin remains an attractive risk-on asset at current rates, a drop below 3% could flood markets with liquidity, further fueling speculation and pushing bitcoin into uncharted territory.”
Donald Trump wants interest rates to be slashed
True to form, US President Donald Trump has not minced his words on the topic of high interest rates. He has criticized both Powell and the Fed, lambasting them for failing to get a grip on inflation or the economy. Trump has been putting pressure on Powell to drop interest rates for the whole of 2024. Trump posted on his Truth Social account:
“Because Jay Powell and the Fed failed to stop the problem they created with inflation, I will do it by unleashing American energy production, slashing regulation, rebalancing international trade, and reigniting American manufacturing, but I will do much more than stopping inflation, I will make our country financially, and otherwise, powerful again.
“The Fed has done a terrible job on bank regulation. Treasury is going to lead the effort to cut unnecessary regulation, and will unleash lending for all American people and businesses. If the Fed had spent less time on DEI, gender ideology, ‘green’ energy, and fake climate change, inflation would never have been a problem. Instead, we suffered from the worst inflation in the history of our country.”
The $TRUMP crypto that Donald Trump launched on January 17, 2025, shortly before he took the U.S. Presidential Office for the second time soared over 1,000% in value over just two days. The cryptocurrency became the 14th-largest in record time.