Crypto market maintains recovery following Fed decision to leave rates unchanged

The crypto market rallied on Wednesday following the Federal Reserve (Fed) decision to keep interest rates unchanged between 4.25% and 4.50%, with projections still firm on two 50 bps rate cuts in 2025.

Crypto market gains as Fed keeps interest rates unchanged

The Federal Reserve (Fed) maintained rates at 4.25%–4.50% for the second consecutive meeting under President Donald Trump's administration. 

The committee also stated it would slow its quantitative tightening (QT) as several members still expect a 50 basis-point rate cut in 2025.

"Fed projections imply 50 bps of rate cuts in 2025, 50 bps more in 2026," FXStreet analysts reported.

In a press conference that followed the meeting, Fed Chair Jerome Powell stated that policymakers are not hurrying to cut rates and will continue to observe the economy's developments.

Powell stated that tariffs, which have characterized a major part of President Donald Trump's trade wars, have escalated expectations of a recession in the US economy, leading to increased economic uncertainty.

The central bank also revised its GDP growth projections to 1.7% from the previous 2.1% it forecasted in December.

Mohamed El-Erian shared at the Blockworks Digital Asset Summit (DAS) that policymakers may need to change how they justify rate cuts. 

Initially, they framed potential cuts as a response to falling inflation, suggesting a stable economy. However, as economic growth weakens, they may have to cut rates to prevent a downturn, signaling economic concerns rather than stability, noted El-Erian.

If the economy continues to fall toward a recession, the Fed may become inclined to cut interest rates.

As a result, the crypto market began to stage a recovery before the Fed meeting, rallying back to a $2.9 trillion market cap.

Several top altcoins also rallied alongside Bitcoin, which rose above $85K for the first time since the tariffs kicked off on March 4. Ethereum, Solana and XRP are up 5%, 7% and 10%, respectively.

Another viable reason for the uptick in crypto could be news of President Donald Trump's presence at the DAS. The president is expected to share major information about his crypto policy at the event on Thursday.

The rise in crypto could also be attributed to its correlation with stocks, which noted slight gains following the Federal Reserve meeting.

The S&P 500 added over 60 points following the announcement, up 1% on Wednesday. Other equity indexes, such as the Nasdaq, have risen over 1%.

"Look for cryptocurrency markets to closely mirror the S&P 500 throughout the indefinite future, though individual altcoins can continue to see increased unpredictability and volatility," said crypto intelligence firm Santiment in an X post on Wednesday.