Bitcoin showed strong signs of life on Friday. The world’s largest cryptocurrency gained around 5% and was recently trading just below the $84,000 mark. The rally was triggered by an interview with Susan Collins, President of the Boston Federal Reserve. In it, she suggested that the Fed would be prepared to support the markets with various tools if necessary – and this is precisely what has fueled investors’ imaginations.
What exactly did Collins say?
In an interview with the Financial Times, Collins made it clear that the central bank is preparing for possible market disruptions. Should liquidity shortages arise, they intend to respond with targeted measures. And she emphasized that while the key interest rate remains the primary tool, it is not necessarily the most appropriate tool for every situation.
She said:
“The key interest rate is our central monetary policy tool, but it is certainly not the only one – and probably not the best one when it comes to liquidity problems or disrupted market mechanics.”
A Familiar Pattern – Memories of 2020
The statements come at a time when uncertainty is growing in the US bond markets. The 10-year Treasury bond, in particular – an important benchmark for mortgages and long-term loans – is currently being sold off by many investors. The result: The yield rose to almost 4.5%. This despite weak stock markets and increasing risk aversion.
Many remember 2020, when the Fed stepped in with massive bond purchases during the coronavirus pandemic to stabilize the markets. Bitcoin was trading at around $5,000 at the time – a year later, the price was over $60,000. A similar situation could be looming now. It’s no wonder, then, that many crypto investors are hoping for similar intervention from the Fed if the bond market comes under further pressure.
The market reacts promptly – and not just Bitcoin is gaining
Since Collins’ statements, crypto prices have risen significantly. Bitcoin not only offset its price decline from the previous day – when the currency lost more than 4% – but also turned positive. At the time of publication, the price was just under $84,000.
The rest of the market also followed suit. Ethereum gained around 3%, XRP added 2.5%, Solana shot up 8%, and Dogecoin also impressed with a 4% gain.
Tailwind from new inflation data
Another reason for the positive sentiment in the markets: the new inflation data. The US Producer Price Index – the price of goods sold by domestic producers – fell by 0.4% month-on-month. This is the sharpest decline since October 2023. It had already been announced that the Consumer Price Index also fell surprisingly sharply in March – from 2.8% in February to 2.4%.
What does all this mean for investors?
The combination of declining inflation and the prospect of possible Fed intervention is resonating well with investors – and has pulled the crypto market out of its slump in a very short time. President Trump’s renewed influence on economic policy in the future is also likely to generate momentum in this context, especially with regard to market expectations of the Fed.
In short: The air is getting thinner for those who remain on the sidelines. Bitcoin is once again demonstrating how quickly the tide can turn – and how closely the market reacts to monetary policy signals. Those who missed out in 2020 may now have a second chance.
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