Several market analysts have raised their concerns following the Federal Open Market Committee (FOMC) meeting that took place on May 7. Uncertainty has spiraled after the decisions made in the meeting, which delivered a less bullish signal than expected. So, what did the FOMC meeting highlight, and how does it affect the crypto market?
What words of Jerome Powell really touched the crypto market?
Reviewing the economic and financial conditions, FOMC Chair Jerome Powell acknowledged that the inflation rate has significantly come down, referring to the past months. Inflation is the rate of rise in prices of goods and services that potentially reduces the purchasing power of the US dollar.
According to a chart by YCharts, a financial research platform, the inflation rate has dipped from 2.82% in February to 2.39% in March 2025. Notably, the inflation rate in January was approximately 3%, whereas the year 2024 experienced a 3.48% high.
So, how will inflation rate hit the crypto market in the future?
However, the FOMC statement issued by the Federal Reserve (aka, FOMC) reads that as of now, “inflation remains somewhat elevated.” The committee has set its clear objective to return the inflation rate to 2% over the longer run.
Having said this, when the inflation rate decreases, the Federal committee does not usually maintain high interest rates. If interest rates do not go up, the crypto market may experience more liquidity, which is bullish for the market in the short term.
What’s more, a lower inflation rate also means a stronger appetite for crypto; an increasing appetite leads to increasing demand. So, here is where the crypto market shines, at least for the short term. Remember, this would be the possible outcome if the Fed brings back the inflation rate to 2% in the future, unless other economic factors emerge.
Now, how does the interest rate impact the crypto market?
Meanwhile, Powell acknowledged that the committee has decided to keep the interest rates unchanged at 4.25-4.50%, which has been the same since December. He has held back from reducing the interest rates due to the tariff war, which has created stagflation and economic uncertainty.
Following this announcement, Bitcoin hit $99,659.97, a 2.74% increase in the past 24 hours. Even the total market cap has experienced a 3.10% surge over the last day. Almost all the cryptocurrencies waved a green light in the context of the Fed’s decision.
Keeping interest rates steady means a lot to crypto. It establishes a solid economy with more investor confidence in crypto. Again, you have a risk appetite and less uncertainty over the market. However, these reasons do not always support the main cause of a bullish market.
Importantly, one of the possible reasons why the market went up could be due to investors’ expectations that the Fed might listen to Donald Trump’s demand to reduce interest rates. Last month, the president urged Powell to lower the rates, calling him “a major loser”.
What happens when the interest rate decreases and increases?
If the interest rate decreases, bullish momentum covers the crypto market because people start borrowing more money in the traditional market, as the interest rate on the return is lower. As cheaper borrowing leads to more liquidity, there could be a spike in cash flow into crypto. On the other hand, if the interest rate increases, borrowing power in the traditional market decreases. This results in less cash flow into the crypto market, often leading to a bearish moment.
While coming to the experts’ take, Binance key opinion leader Cas Abbé has put his words on the FOMC meeting this way: “I think we need to wait more for the alt’s rally, but until then, BTC could definitely go up a lot.”
The crypto analyst has also emphasized that the market is already aware that the Fed will bring at least three rate cuts this year, as announced. This also adds to the reason for the blooming crypto market.
Dan Gambardello, specifically, a Cardano analyst, expressed a bullish outlook for the market, saying: “I can’t believe $100k $BTC is going to be the starting line of this cycle’s bull market.” Michael Van de Poppe, founder of MN Fund, assumed that the altcoin market capitalization would move towards $925 billion.
