The Federal Reserve issued a "reassurance" of interest rate cuts, and BTC rose to regain $67,000

On Wednesday, the Federal Reserve kept interest rates in the range of 5.25%-5.5% as expected. In addition, the dot plot also maintained the expectation of three rate cuts this year. The "reassurance" eased investors' concerns that the Fed will take a tougher stance.

The three major U.S. stock indices closed higher, with the Dow Jones Industrial Average initially closing up 1.03%, the S&P 500 up 0.89% and the Nasdaq up 1.25%, all setting new closing highs. The dollar index (DXY), which measures the strength of the U.S. dollar against other major currencies, fell nearly 0.7% from its intraday high, indicating that investors' risk appetite has increased.

After the Fed meeting, Bitcoin reversed higher and hit an intraday high of $67,781. Earlier in the day, BTC fell to $60,793.60.

Ethereum recovered 6% of its losses earlier in the day to rise to $3,379.43 after foreign media such as Coindesk reported that the Ethereum Foundation was facing investigations from unnamed governments and the U.S. SEC over its classification of the asset as a security.

Solana rose 7%, Dogecoin (DOGE), Litecoin (LTC) and Bitcoin Cash (BCH) led gains among major altcoins, and Polygon ’s Matic token rose 1.5%.

Cryptocurrency-related stocks rebounded collectively. Coinbase rose 11%. MicroStrategy rose 9% after falling about 20% earlier this week. In the crypto mining sector, Iris Energy and CleanSpark rose 26% and 22% respectively, Marathon Digital rose 16%, and Riot Platform rose 11%.

Fed does not cut rate cut expectations

Before the meeting, some investors worried that a recent series of inflation reports might lead to fewer rate cuts than the market expected. But the Fed reiterated its December forecast that it planned to cut interest rates three times by the end of the year. Even so, the Fed said it needed more evidence that inflation was slowing before it began to ease monetary policy. The central bank said: "The committee does not expect it will be appropriate to reduce the target range until it has more confidence that inflation is moving toward 2% on a sustained basis."

"Inflation has risen this year, but Jerome Powell has not changed his tone," said David Russell, head of global market strategy at TradeStation. "Investors are relieved that three rate cuts are still retained in the dot plot, which supports the market and risk appetite."

Zach Pandl, managing director of Grayscale Research, predicted in a report that the upcoming situation could support the price of Bitcoin. Pandl believes: "If interest rate cuts remain the base case, the outlook for cryptocurrencies still looks favorable. A soft landing of the economy, a rate cut by the Federal Reserve, and a controversial presidential election should be a supportive macro backdrop for Bitcoin."

Analyst: $50,000-52,000 is the "bottom line" of this bull market

Bitcoin’s recent weakness began as traders began to take profits after the cryptocurrency surged about 70% from the start of the year to last Wednesday’s peak. Data from CryptoQuant showed a sharp increase in short-term holders selling bitcoin for profit on March 12. This profit-taking led to a surge in long liquidations of leveraged Bitcoin positions, which continued into the beginning of this week, according to CoinGlass.

In addition, Bitcoin ETFs have also shown some cooling momentum. According to data from BitMEX Research, the total net outflow of Bitcoin ETFs on Monday was US$154.4 million. This is the first time that ETFs have recorded net outflows since March 1.

"The ETF-fueled rally has at least temporarily paused as net inflows begin to slow," Citi analyst Alex Saunders said in a report on Wednesday. "Spot Bitcoin ETFs have seen a total of $12 billion in inflows since their listing, but a slowdown in inflows could lead to weaker price action after Bitcoin's recent all-time high."

Vijay Ayyar, vice president of international markets and growth at cryptocurrency exchange CoinDCX, said in an interview with Bloomberg that in previous Bitcoin bull markets, when the market began to heat up, a 20%-30% pullback was normal, but if Bitcoin fell below the $60,000 threshold, it might weaken further and test the $50,000 to $52,000 level, which would be the bottom line for maintaining this bull market.

Ruslan Lienkha, head of markets at YouHodler, said that Bitcoin prices will continue their long-term upward trend and viewed the recent adjustment as a "breathing breath" before Federal Reserve Chairman Powell's speech today. He said: "Before the next price increase to a new all-time high, we may see prices consolidate for a period of time, fluctuating around $10,000 around current levels. Therefore, now is just another opportunity for long-term investors to accumulate long positions."

Lienkha added: “More frequent market moves have eased as futures funding rates have begun to normalize, meaning less demand for leveraged exposure in crypto . However, open interest and volumes remain high.”

The market currently prices at least one rate cut before the July 31 FOMC meeting, with rates down by about 50 to 100 basis points by the end of 2024, according to the CME FedWatch Tool.