The Federal Reserve (Fed) decided this morning to keep interest rates unchanged at 4.25%-4.5%, maintaining the expectation of two rate cuts in 2025, and announced that it will slow down the balance sheet reduction from April, reducing the monthly redemption cap of U.S. Treasuries from $25 billion to $5 billion, while the cap for agency debt and mortgage-backed securities remains unchanged at $35 billion, which is the first time QT has been slowed since June last year.
As the Fed kept interest rates unchanged and tended to maintain a dovish stance, U.S. stocks shook off the gloom and surged, and Bitcoin also fluctuated higher, reaching a high of $87,446 today, a new high since March 7, and has risen more than 13% from the low of $77,000 on March 11.
Bitcoin may have bottomed
In this regard, founder Arthur Hayes tweeted that Bitcoin may have bottomed at $77,000, but the stock market may still have room to fall, which could force the Fed to implement a more accommodative policy:
Powell has delivered on his promise, with QT essentially ending on April 1. Going forward, to truly drive the market into a bull market, either the SLR exemption policy needs to be reinstated or QE needs to be restarted.
Has Bitcoin bottomed at $77,000? Possibly, but the stock market may still have more pain, which could force Powell to fully pivot to the Trump camp, so stay nimble and keep enough cash.
Previously, Arthur Hayes had written an article at the beginning of the month analyzing the economic strategy of the Trump administration, speculating that its policies could become a major driving force for the Bitcoin market. He believes that Trump will rely on debt financing to implement his "America First" policy, and will cut government spending, increasing the likelihood of a recession, forcing the Fed to cut rates or print money to stabilize the financial system.
Arthur Hayes believes that the scale of money printing could reach 70% to 80% of the level during the COVID-19 pandemic, which will drive Bitcoin to $1 million during Trump's term:
Since the U.S. printed $4 trillion alone, Bitcoin has risen about 24 times from its 2020 low to its 2021 high.
Given that Bitcoin's market cap is now much larger than it was then, a conservative estimate is that the U.S. printing $3.24 trillion alone could drive Bitcoin to rise 10 times, which is the answer for those who ask how Bitcoin can reach $1 million during Trump's presidency.
Trump pressures Powell to cut rates
Since taking office, Trump has repeatedly imposed tariffs on goods from Canada, Mexico and China, and plans to impose reciprocal tariffs on major trading partners on April 2, triggering global economic turmoil. Powell acknowledged this morning that tariffs have begun to affect the economy and have been incorporated into the Fed's economic forecasts, and said the Fed will distinguish between "tariff inflation" and "non-tariff inflation" to more accurately assess the policy effects.
Notably, after the Fed's decision, U.S. President Trump publicly posted on Truth Social this morning calling for Powell to cut rates:
As the U.S. tariffs begin to have a (modest) effect on our economy, the effect of the Fed cutting rates would be much better
Do the right thing. April 2nd is Independence Day for America!
Currently, based on the FedWatch tool from CME Group, the market generally expects the Fed to still cut rates twice by 2024, with a 57.5% probability of a 25 basis point cut in June, but the specific timing will depend on the inflation situation and the impact of Trump's tariff policy.
