Bitcoin price is rebounding. The reason is different than many people think

Bitcoin price is rising again. Cryptocurrency managed to catch its breath again and return to – for now not so certain – growth. But what is the reason for this?

Bitcoin price increases due to Fed's announcement

Bitcoin has been losing value over the last week. It was a natural correction of growth. And it's not particularly scary at all. Almost exactly four years ago, the declines were much more terrible, but also caused by the COVID-19 pandemic (yes, it's been four years!).

The recent cooling of the market was necessary. The Fear and Greed Index has shown extreme greed for too long. In addition, the cryptocurrency exceeded the ATH from the previous cycle before the halving (this one will take place only in a month). This happened for the first time in BTC history. Relegations were a necessity. Without them, the cycle could end even this year.

Shortly before the announcement of the Fed's latest decisions, the mood on the bitcoin trading floor was still subdued. No one was dancing – everyone was holding up the walls. After we learned about the central bank's March report, everything changed. Reason?

Theoretically, the Fed did nothing new or groundbreaking. He announced that interest rates remain unchanged – they are still in the range of 5.25 to 5.5%. This is what analysts expected. So why did the market rebound?

The key data is contained in the Federal Reserve document mentioned above. It's about the so-called feddots. They show that the long-term policy of the institution does not change. This year we will see three rate cuts. The first one will probably be in June. And this confirmation probably prompted the bulls to launch another attack.

Not just interest rates

But that's still not all. In addition to the issue of rates, there is a planned slowdown in the pace of reduction of the Fed's balance sheet.

At this meeting, we discussed issues related to slowing down the rate of decline in our balance sheet total. Although we have not made any decisions today, the general thought of the Committee is that it will be appropriate to slow down the pace of reduction of the balance sheet total very soon.

– Jerome Powell, the head of the monetary authority, told the media.

In practice, this will mean that the Fed will sell its assets at a slower pace. This is also a bullish signal.

To sum up, yesterday's decisions of the Federal Reserve confirmed the market that the central bank's strategy is not changing. And this despite some increase in consumer inflation. As I have already pointed out on bitcoin.pl, core inflation is more important for Powell and his people. This one falls. We are therefore rapidly approaching rate cuts and a return to quantitative easing. Although probably not on such a scale as before the COVID-19 pandemic.

My instincts tell me that interest rates will not return to the low levels they were before the pandemic and after the financial crisis. But there is enormous uncertainty associated with this

Powell said.

Today, one bitcoin costs approximately USD 67,700. The price increased by 7% in one day.