The Federal Reserve’s recent meeting minutes disclosed a rare division among its governors, with Christopher Waller and Michelle Bowman advocating for a 25 basis-point interest rate cut, diverging from the majority’s stance. Despite the Fed’s cautious outlook, the cryptocurrency market displayed resilience, with Bitcoin and Ethereum recovering from an initial downturn, notably with Ethereum outperforming Bitcoin significantly.
Bitcoin (BTC) has regained some value, currently trading at US$114,000 (AU$176,400), while Ethereum (ETH) has surged by 6% to US$4,340 (AU$6,680). This bullish sentiment in the crypto space is reinforced by robust buy-side activity during minor price pullbacks, indicating that investors are viewing these dips as prime buying opportunities, according to FalconX analysts.
The meeting minutes revealed that Waller and Bowman underscored the need for a rate reduction, citing inflation closely approaching the 2% target when excluding tariff-induced effects. Their proposal was not accepted, marking the first occurrence of a dual dissent among Federal Reserve governors since 1993. The last solo objection was raised by Bowman in September 2024, when she suggested a more modest rate cut than what was ultimately approved.
Bowman’s rationale for her position was based on inflation trends revealing a movement towards the Fed’s target, alongside signs of slowing economic growth and labour market weakness. She contended that an early rate cut could serve as a safeguard against potential economic downturns and job losses.
Expectations for a rate cut have waned following the Consumer Price Index, which reported a 2.7% annual inflation rate, unchanged from the previous month but still higher than the 2% goal set by the Fed. As a result, the probability of a rate cut in September dropped from over 94% to 82% within a week, according to CME Group’s FedWatch tool.
In a broader analysis of Bitcoin’s performance, FalconX’s Research Head David Lawant highlighted a consistent trend in the cryptocurrency’s order book. He noted that whenever Bitcoin experiences slight price declines from its peak, there is a rapid shift in market dynamics where selling pressures diminish, and buy orders surge instead. This phenomenon suggests that major sellers are hesitant to push prices lower, while institutional buyers are actively stepping in during minor dips, reinforcing Bitcoin’s bullish outlook.
Lawant’s observations underline the strength of Bitcoin’s market structure, indicating that, despite trading below its recent all-time highs, the absence of persistent selling pressure and the dominance of buyers signify sustained confidence in Bitcoin’s trajectory.
In summary, while the Federal Reserve grapples with internal differences regarding interest rates, the cryptocurrency market remains buoyant. Bitcoin and Ethereum continue to draw significant investor interest, with market behaviours suggesting an optimistic outlook from buyers unperturbed by short-term price fluctuations. This robust demand for digital assets indicates a firm belief in the long-term potential of cryptocurrencies, setting a solid foundation for future growth.
