How Powell’s Words Could Impact Bitcoin and Crypto Markets

The market is on edge as Powell’s comments take center stage. Unlike last year’s crash, this time, with no rate change, the real impact will unfold after the meeting. While the Fed’s decision on January 31 is expected to be a non-event, Powell’s words could shake up risk assets like Bitcoin. Bitcoin at present dropped to $102K after hitting an all-time high of $109K this month. 

What to Expect from the Fed’s Decision

The Fed is likely to keep interest rates steady at their current range of 4.25% to 4.5%. This follows a 25 basis point cut in December, but policymakers have signaled that rate cuts will slow down in 2025. As a result, this meeting is seen as a non-event for most markets, including cryptocurrencies, as the rate decision has already been communicated in advance. In the meanwhile, Trump has already shown his preference for lower rate cuts to support the crypto assets. 

What Powell Says Could Move Bitcoin

Even though the rate decision is predictable, there are three big issues Powell might be asked about, and his answers could shake up the markets. 

Impact of Deportations on Inflation and Labor Market

One major topic is deportation, President Trump has started deporting illegal immigrants, and some estimates say millions could be removed. If that happens, the U.S. could lose a big chunk of its workforce, making it harder for businesses to find workers. That could push wages higher and drive inflation up. If Powell agrees that this is a risk, it could mean fewer rate cuts ahead, which would be bad news for Bitcoin and other risky investments.

Concerns Over U.S. Debt Ceiling

Another issue that could come up is the U.S. debt ceiling. The U.S. has hit its $36 trillion debt limit, and the government is now using emergency measures to keep running. One of these measures involves spending money from a special account at the Fed, which could pump extra cash into the economy. This could help risk assets like Bitcoin in the short term. But Powell might downplay its impact, which could keep markets cautious.

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Rent Inflation and Its Impact on Risk Assets

Lastly, Powell might address the recent moderation in rent inflation, which has a significant effect on the consumer price index. If Powell acknowledges this disinflationary trend, it could boost the crypto market, potentially driving up risk assets like Bitcoin.

Crypto Brace for Impact

Following the Fed’s meeting, Bitcoin dropped 1.15% in the last 24 hours, trading at $102,134.33, but still holds a dominant 58.30% market share with a $2.08 trillion market cap. Despite the dip, BTC Spot ETF inflows of $18.44 million on January 28 suggest continued institutional interest, though overall trading volume of $42.81 billion reflects caution ahead of the FOMC decision. Ethereum and Solana saw steeper losses, with ETH down 3.14% to $3,118.79 and SOL falling 5.52% to $230.09, while XRP remained relatively stable with a 0.52% dip to $3.10.