Fed Rate Cut Decision in Focus Amid Crypto Volatility and Recession Fears

Crypto markets experienced sharp ups and downs on Wednesday and Thursday ahead of President Trump’s tariff announcement, which imposed a 10% fee on all imports. Major tokens like Bitcoin (BTC), Ether (ETH), Solana (SOL), and XRP rallied before the speech but quickly dropped as global markets declined, erasing earlier gains.

Prices Bounce Back

However, prices bounced back on Friday morning, with BTC staying above $83,100, ETH reclaiming $1,800, and XRP, SOL, and ADA each rising over 2%.

Ahead of Trump’s speech, investors moved large amounts of Bitcoin, ETH, and XRP into exchanges, showing they were ready to sell. Bitcoin transactions hit 2,500 BTC in one block just hours after the speech. Coinbase saw more Bitcoin deposits, especially from big holders. ETH inflows peaked at 80,000 per hour, and XRP transfers to Binance jumped to 130 million in one hour, up from under 10 million the day before.

This activity showed investors were cashing out amid economic uncertainty, with demand for Bitcoin and ETH dropping as traders closed long positions to take profits.

Traders Shifting Focus To Rate Cuts

However, traders are now shifting their focus from oversold markets and U.S. tariffs to new economic data and expected rate cuts. This shift has sparked hopes for a possible bounce in Bitcoin prices soon. With the pressure easing, fresh economic data coming out later today could give markets a much-needed lift.

“Investors are watching closely for signs of weakness in the U.S. job market,” QCP Capital shared in a Friday update. “If the data is weaker than expected, it could lead to more Fed rate cuts this year to support the slowing economy.”

Markets Expect Four Rate Cuts This Year

Markets are already expecting four rate cuts in 2025—0.25 basis points each in June, July, September, and December. Rate cuts help boost the economy by making borrowing cheaper. Short-term interest-rate futures now show a 70% chance of a Fed rate cut in June, up from 60% before the tariffs were announced.

However, Morgan Stanley expects the U.S. Federal Reserve won’t cut rates this year due to potential elevated inflation from Trump’s new tariffs. The Wall Street brokerage had previously predicted a 25 basis point cut in June.

Fed To Keep Rates Steady?

Many Fed officials recently said they want to keep interest rates steady for a while to see how Trump’s policies affect the economy. Some are still worried about inflation and unsure if price changes will last.  Fed Vice Chair Philip Jefferson added that there’s “no need to rush” into changing rates.

The Fed official noted that if the economy stays strong and inflation doesn’t drop, the Fed could keep rates at 4.25%-4.5% for a while. But if the job market weakens or inflation falls, the Fed will adjust accordingly.

Bitcoin and the broader market usually respond well to rate cuts since lower rates make traditional investments like bonds less attractive and a weaker dollar strengthens BTC as an inflation hedge. QCP Capital sees high volatility but suggests a potential short-term bounce due to oversold risk assets.

Recession Concerns

Luke Tilley, chief economist at Wilmington Trust, said the new tariffs raise the chance of a U.S. recession to 50%, warning that the economy could slow down in just three months if the tariffs stay. He pointed out that the real challenge is figuring out how much damage uncertainty is causing for businesses and consumers. 

We’ll get more insight into the Fed’s stance on Friday when Fed Chair Jerome Powell speaks after the March jobs report. Last month, Powell said he believes any inflation from Trump’s tariffs will be temporary, aligning with the White House’s view.