The prices of cryptocurrency have started to recover as the Federal Open Market Committee (FOMC) meeting draws near. Bitcoin is hovering around the $85K as it makes higher highs, gaining more than 8% during the past week while Ethereum is also on an uptrend, as it has appreciated by more than 4% during the last 7 days. In addition to these top cryptocurrencies, many other major coins like Cardano, Solana, and XRP are also on an uptrend at press time.
However, the Fed Chair Jerome Powell’s announcement on the interest rates at the meeting scheduled for May 6-7, 2025 will decide whether the crypto prices will keep recovering or depreciate, as the central bank finds where it stands in terms of recession. Expressing his thoughts, Research Analyst at crypto market maker GSR, Carlos Guzman stated, “If the economic situation globally looks bad, we’d likely see more stimulative policy from central banks,”. That might be more positive for crypto medium-term, maybe not short-term, with all this [recent] volatility.”
Although there is no direct correlation between crypto prices and interest rates, historical data shows that when there is an increase in interest rates, borrowing credit becomes expensive, and the investor’s risk appetite declines. When it becomes costlier to borrrow loans, the supply of money drains and investors prefer to go to traditional bonds rather than risky assets like crypto. This lack of interest in crypto could crash the prices.
Meanwhile, on April 14, 2025, the Federal Reserve Bank of New York’s Center for Microeconomic Data released the March 2025 Survey of Consumer Expectations. The survey result shows that “households’ inflation expectations increased at the short-term horizon, remained unchanged at the medium-term horizon, and ticked down at the longer-term horizon.”
Furthermore, the report points out that unemployment, job loss, and earnings growth expectations deteriorated while the household income growth expectations declined. “Households were also more pessimistic about their year-ahead financial situations and credit access. Stock price expectations declined and reached the lowest level since June 2022”.
