Key Points
- Bitcoin’s value increased following comments from U.S. Federal Reserve Chair Jerome Powell indicating banks can serve crypto clients.
- The Federal Open Market Committee decided to maintain current interest rates, causing diverse reactions in the crypto market.
Bitcoin’s price experienced a boost following remarks made by Jerome Powell, Chair of the U.S. Federal Reserve, at a recent Federal Open Market Committee (FOMC) meeting. Powell indicated that banks have the ability to serve clients in the cryptocurrency sector.
The FOMC’s decision to keep interest rates unchanged on Wednesday, Jan. 29, initially resulted in a subdued response from the crypto markets. The Fed’s decision to maintain the federal funds rate between 4.25% and 4.50%, due to what was described as “somewhat elevated inflation,” was in line with analysts’ predictions.
Bitcoin’s Reaction to FOMC Decision
Bitcoin (BTC) saw a slight increase of 0.5% shortly after the release of the FOMC minutes. This uptrend eventually increased to 3%, pushing the value of BTC above $103,500 during the U.S. evening trading session.
Powell responded to a question regarding crypto, stating that U.S. banks are “perfectly able” to serve crypto customers, as long as they comply with risk disclosure requirements. He further clarified that it is not the Fed’s policy to de-bank legally compliant customers, addressing concerns relating to the so-called “Operation Choke Point 2.0.”
The Impact of Powell’s Remarks
Powell also expressed his belief that “great regulation on crypto would be helpful.” He reiterated that the U.S. central bank is not legally permitted to hold BTC, a statement which led Senator Cynthia Lummis to suggest a potential change in the law.
Following Powell’s comments, digital asset markets turned positive, while major U.S. equity indices closed the day slightly in the red. The unchanged federal interest rates prompted differing reactions among bulls and short-term bears in the crypto market.
Bulls argued that Bitcoin could surge in February, as it has in eight of the last 12 Februaries. They also speculated that President Trump’s pro-crypto stance could provide additional support for BTC and the broader market.
Bears, however, contended that static interest rates could deter new capital inflows into BTC and related products, such as Wall Street’s spot Bitcoin exchange-traded funds. Reports suggest that President Trump has encouraged Powell and the Fed to implement lower interest rates. Powell, however, stated that he has had no contact with Trump so far and did not comment on the rumored request.
