The Fed's decision of 200 billion dollars: how federal policy will rewrite the scenario for Bitcoin

The Federal Reserve will halt interest rate cuts this week, keeping them at 3.5-3.75%. However, behind this technical decision lies a much more complex game: how to interpret the “pause” and what risks it poses to the markets.

The main question that traders are concerned about is not the rate decision itself, but what signal Chairman Jerome Powell will send at the press conference. His words will determine whether the current pause is “hawkish,” supported by concerns about inflation, or “dovish,” opening the door to future easing. Morgan Stanley expects the latter scenario — the bank forecasts that the Fed’s statement will leave open the possibility of further adjustments, signaling readiness to act.

CME FedWatch tool estimates a 96% probability of maintaining rates, which fully aligns with the signal Powell gave in December. At that time, he indicated that no additional cuts are expected in 2026. Moreover, Minneapolis Fed President Neil Kashkari recently confirmed that he considers the current moment unsuitable for new reductions.

When the dollar weakens and Bitcoin soars: a turning point

Two opposing scenarios are vying for investors’ attention. If Powell adopts a cautious tone, emphasizing ongoing inflation risks, it will strengthen the dollar and put pressure on risky assets, including cryptocurrencies. Such a “hawkish” turn would be unfavorable for Bitcoin bulls.

The alternative is a “dovish” scenario, where Fed leadership leaves the door open for possible easing in the coming months. This is seen by the market as a green light for a recovery in stock and Bitcoin prices. JPMorgan, however, takes a unique position: the bank’s analysts do not expect any rate changes this year at all, with hikes beginning only in 2027.

Among the committee members appointed by the administration, some openly criticize the pause. Stephen Miran, for example, advocates for a bold move — a one-time 50 basis point cut. If critics’ voices grow louder, it will strengthen the case for upcoming easing and support both the stock market and cryptocurrency assets.

$200 billion for housing: an inflationary bomb under policy

This is where the situation becomes critical for the Fed. The Trump administration announced plans to spend $200 billion on mortgage-backed securities. The official rationale is to lower mortgage rates and increase housing affordability. In reality, as Allianz Investment Management analysts point out, such a volume of purchases could trigger “demand outpacing supply,” inflating prices and increasing inflationary pressure specifically in the real estate sector.

At the same time, an order was issued requiring large institutional investors to refrain from buying homes for single families — the logic is the same, but the effect will likely be limited, given the relatively small share of institutional ownership in the market.

Powell will have to answer an uncomfortable question: how do these measures align with the fight against inflation? ING notes that a detailed explanation of the Fed’s current stance could strengthen the dollar, but it is unlikely to shift the needle toward future cuts. Analysts believe that the next dollar weakness will be driven more by worsening economic indicators than by statements from the central bank.

Vulnerable points for the chairman

Powell faces a barrage of uncomfortable questions. Besides Trump’s housing policy, he will be asked about tariffs — a measure already embedded in current market inflation expectations with delayed effects. There is also a more personal issue: a lawsuit initiated by the Department of Justice.

What does all this mean for Bitcoin in practice

Here’s the paradox: Bitcoin has not risen despite the dollar weakening in recent weeks. JPMorgan strategists explain this by saying that the current dollar decline is driven by short-term sentiment rather than structural macroeconomic changes.

Markets are not yet perceiving currency weakness as a signal of a long-term reversal in monetary policy. This means that cryptocurrencies are primarily traded as assets sensitive to liquidity and risk volatility, not as a reliable hedge against the dollar. Gold and emerging market equities remain more attractive for diversification out of the US currency.

Final conclusion: this week’s Fed meeting will most likely leave interest rates unchanged, but the real game is in the interpretation. If Powell signals a “dovish” outlook for future easing, Bitcoin will gain support. If he emphasizes inflation risks related to Trump’s housing and tariff policies, the dollar will strengthen, and crypto assets will come under pressure. The stakes are high for both sides.