Fed’s Rate Pause Fuels Bitcoin Rally as Markets Eye Powell’s Next Move

In a widely expected move, the U.S. Federal Reserve has opted to keep interest rates unchanged — and investors are cheering. Markets surged on Tuesday as confidence grew that the central bank would maintain its benchmark rate between 4.25% and 4.50%, signaling a continued shift in tone from inflation-fighting hawkishness to economic stabilization.

Bitcoin, ever sensitive to macro signals, is riding the wave. The flagship cryptocurrency jumped nearly 4% in the past 24 hours, trading around $97,000 as of early Wednesday, amid speculation that easier financial conditions are ahead.

What the Fed’s Pause Means

The Federal Open Market Committee (FOMC) wrapped up its two-day policy meeting on May 7, and Fed Chair Jerome Powell is expected to speak at 2:30 p.m. ET. According to CME’s FedWatch Tool, traders had priced in a staggering 99% chance the Fed would hold steady — a level of market certainty rarely seen.

Driving the Fed’s cautious approach are competing forces: still-stubborn inflation, increasing consumer debt, and geopolitical uncertainties including tariffs and trade tensions with China. March’s inflation reading showed prices up 3.4% year-over-year — still well above the Fed’s 2% target. Yet, there are growing concerns that aggressively tightening policy could trigger a recession heading into the 2026 election cycle.

Adding political pressure to the mix, former President Donald Trump has openly called on Powell to slash rates, claiming it would help stimulate growth and counterbalance trade-related costs.

Crypto’s Moment

Lower interest rates — or even just the expectation of stable ones — often act as rocket fuel for cryptocurrencies. With borrowing costs potentially set to drop later this year, investors are piling into riskier assets like Bitcoin. On-chain analytics firm Nansen reports a surge in wallet activity and stablecoin inflows, both signs that institutional and retail investors are feeling more bullish.

Bitcoin’s latest gains also come as it continues to decouple, albeit slowly, from traditional equities. The S&P 500 dipped below its 200-day moving average this week — typically a bearish signal — while Bitcoin’s technical indicators remain strong. Short-term moving averages are crossing above long-term trends, often interpreted as a bullish momentum signal.

Altcoins Lag Behind

While Bitcoin enjoys a clear uptick, altcoins like Ethereum, Solana, and Avalanche are treading water. Many traders are hesitant to go all-in until broader macroeconomic clarity emerges, such as updates on the U.S. budget deal, pending tax reform proposals, or international trade policy shifts.

For now, the crypto market appears to be taking a “wait and see” stance beyond Bitcoin, with many altcoins trading sideways despite the bullish sentiment.

The Bigger Picture

This Fed decision reinforces a broader narrative: that the central bank is now walking a tightrope between maintaining inflation control and supporting economic growth. While today's pause doesn’t guarantee rate cuts, it adds momentum to the growing belief that the worst of the tightening cycle is behind us.

For crypto investors, this could be a pivotal moment. If inflation stays in check and the Fed begins easing later this year as expected, the tailwinds for Bitcoin and the broader crypto sector could only get stronger.

As the global economy shifts gears, all eyes remain on Powell’s remarks. Whether you're in traditional equities or digital assets, the message is clear: The Fed may have just opened the door to the next leg of the market rally.