Hawkish Fed Minutes Stall Bitcoin's Recovery Momentum

Bitcoin CRYPTO000BTC

The prospect of near-term interest rate cuts has been effectively dismissed by the latest signals from the U.S. Federal Reserve. Minutes from the central bank's most recent policy meeting, released on February 18, revealed a surprisingly hawkish stance, with several officials even suggesting potential rate hikes might be necessary. This shift in tone placed immediate pressure on Bitcoin, driving its price below the $66,500 threshold.

The cryptocurrency market reacted swiftly to the Fed's communications. On the afternoon of February 18, Bitcoin's value declined from approximately $68,300 to under $66,500, marking a 24-hour drop of 1.6%. This movement was amplified by increased trading volumes as Asian markets returned to full operation following Lunar New Year holidays. Further headwinds emerged from escalating geopolitical tensions between the U.S. and Iran, which pushed oil prices up over 4% and dampened overall risk appetite among investors.

From a technical perspective, Bitcoin is currently trading below its key moving averages. The weekly Relative Strength Index (RSI) sits at 27.64, approaching territory typically considered oversold. However, some analysts point to a bullish "Golden Cross" pattern that formed on the weekly chart on February 17. Historically, over the past six months, this pattern has preceded price advances ranging from 15% to 21%. Market observers now identify the support zone between $65,000 and $66,000 as a critical area for any potential short-term price recovery.

Dissecting the Federal Reserve's Stance

The published minutes, detailing the January 28 meeting of the Federal Open Market Committee (FOMC), painted a more restrictive picture than many market participants had anticipated. The committee voted 10 to 2 to maintain the benchmark interest rate within the 3.5% to 3.75% range. Notably, Governors Christopher Waller and Stephen Miran dissented, advocating for a 0.25 percentage point reduction.

A key takeaway was the concern voiced by several meeting participants. They warned that additional policy easing amid persistently elevated inflation could undermine the Fed's commitment to its 2% inflation target. In a significant development, some members pushed for the inclusion of language in the official statement acknowledging potential "upward adjustments" to the policy rate?a clear nod to the possibility of future hikes. Consequently, a rate cut at the next scheduled meeting on March 17-18 is now considered off the table.

Leadership Transition Adds a Layer of Uncertainty

This hawkish majority within the FOMC coincides with an impending leadership change. Jerome Powell's term as Chair concludes in May. His designated successor, Kevin Warsh, has historically favored lower interest rates, aligning with the stance of the Trump administration.

Warsh's first meeting as Fed Chair would potentially be in June. A central question for markets is whether he can steer a deeply divided central bank toward a more accommodative policy, especially while inflation proves stubborn and a committee majority remains focused on maintaining a restrictive course. This looming transition injects further uncertainty into the monetary policy outlook.