Bitcoin and Ethereum Dip as Fed Holds Rates Steady Amid Middle East Uncertainty

Fed Holds Rates Steady for Third Time

The Federal Reserve kept its benchmark interest rate at 3.5% to 3.75% on Wednesday, marking the third consecutive hold this year. The decision comes as conflict in the Middle East fuels energy cost uncertainty, with the Fed citing "a high level of uncertainty about the economic outlook."

Market Reaction

Bitcoin fell 1.4% to around $75,100, while Ethereum dropped 2.3% to $2,240 following the announcement. The dip reflects market sentiment that tighter liquidity conditions remain bearish for risk assets in the short term.

Powell's Final FOMC Meeting?

Jerome Powell indicated this was likely his last FOMC meeting as chair, as his eight-year tenure ends next month. He plans to remain a voting member and transition to a governor role for a period "to be determined," citing "a series of legal attacks on the Fed" threatening its independence.

Warsh Nomination Advances

The Senate Banking Committee advanced Kevin Warsh's nomination to succeed Powell. Warsh, a crypto investor with holdings in Solana and Polymarket, has described many crypto projects as fraudulent but voiced support for Bitcoin. The full Senate will vote on his confirmation.

Rate Cut Prospects Dim

Fed Governor Stephen Miran called for a 25 basis-point cut, but the majority favored holding steady. Traders don't expect rate cuts until at least December, per CME FedWatch. Lower rates typically benefit crypto by increasing liquidity, but the "higher for longer" stance is a headwind.

Energy Costs Complicate Inflation Fight

U.S. energy costs have risen due to tensions in the Strait of Hormuz, where 20% of global oil flows. The national average gas price hit $4.22, up 6.2% over the past month, complicating the Fed's inflation battle.

Iggy Ioppe, CIO at Theo, noted: "In the near term, the 'higher for longer' message is a headwind for Bitcoin."