Main Points:
- The Federal Reserve held rates steady on May 7, citing rising risks of both inflation and unemployment—conditions often linked to stagflation.
- Bitcoin briefly dipped below $96,000 but rebounded to test $98,000, up around 1.6% in the 24 hours following the FOMC decision.
- On‑chain metrics like the “Age Consumed” indicator plunged, signaling long‑term holder confidence and potential for a breakthrough above $100,000.
- Major altcoins saw mixed reactions: XRP and other tokens underperformed, while implied volatility suggests potential 3–4% swings across Ethereum and Solana.
- Macro factors such as renewed U.S.–China trade talks and U.S. state crypto reserve bills provided additional tailwinds.
- Analysts, including Grayscale’s Zach Pandl, argue Bitcoin’s scarcity and digital nature position it as a modern store of value amid policy uncertainty.
- Looking ahead, sustaining momentum will depend on economic data, tariff developments, and investor appetite for digital assets.
1. FOMC Holds Rates, Flags Stagflation
On May 7, 2025, the Federal Open Market Committee opted to keep its benchmark interest rate unchanged at 4.25%–4.50%, emphasizing heightened uncertainty in the economic outlook and warning that both inflation and unemployment risks have risen, a dynamic often associated with stagflation. Chair Jerome Powell reiterated that the economy remains solid but underscored the Fed’s “wait‑and‑see” stance as it monitors evolving trade‑related shocks and inflationary pressures.
Analysts noted that the Fed’s subtle shift in tone reflects growing concern that tariff policies could drive simultaneous economic slowdown and price increases. This “stagflation lite” scenario leaves the central bank with limited options: cutting rates risks fueling inflation further, while tightening policy could stifle growth. Economists estimate that meaningful rate adjustments are unlikely before late 2025, pending clearer data on both job markets and price stability.
2. Immediate Market Reaction: Bitcoin and Beyond
Bitcoin initially slipped to $95,866 shortly after Powell’s press conference but quickly retraced to tap $98,000—the highest level since late February—before settling near $97,000, representing a roughly 1.6% gain over the prior 24 hours. The rebound suggests that the market interpreted the Fed’s cautious tone as supportive of alternative assets, given limited policy room to combat potential economic weakness without stoking further inflation.
In contrast, several altcoins underperformed. XRP fell about 2.7% to $2.12, while tokens like Avalanche (AVAX) and Uniswap (UNI) recorded modest declines amid broader profit‑taking. Despite this, overall crypto market capitalization inched up by 0.3%, buoyed by Bitcoin’s strength against a backdrop of mixed equity and bond market performances.
3. On‑Chain Insights: Age Consumed and Holder Confidence
Post‑FOMC, on‑chain data reveal that Bitcoin’s “Age Consumed” metric—tracking dormant coins moved on the blockchain—plunged by over 90% in the 48 hours following the rate decision, dropping from 49.2 million BTC‑days to just 4.3 million BTC‑days. Such a collapse indicates that long‑term holders are largely remaining inactive, a bullish signal typically preceding sustained price advances.
Concurrently, Bitcoin futures open interest rose by $189 million, and trading volume jumped 15%, underscoring renewed speculative interest as traders anticipate a push toward the $100,000 milestone. With reduced selling pressure from established holders and elevated demand from new entrants, many on‑chain analysts see a clear path for Bitcoin to challenge its all‑time highs in the coming weeks.
4. Broader Altcoin Performance and Volatility Dynamics
While Bitcoin dominated headlines, implied volatility indices suggest that major altcoins could experience even larger moves. As of May 7, Ethereum’s one‑day implied volatility stood at 3.45%, and Solana’s at 4.30%, compared to Bitcoin’s 2.56%, reflecting expectations of 24‑hour price swings of $2,470 for BTC and proportionally larger moves for ETH and SOL.
XRP’s forward implied volatility on May 8 was near 78%, hinting at potential 4.08% intraday swings, while Uniswap has shown technical consolidation between $4.39 and $6.32, signaling a neutral medium‑term bias with bearish short‑term momentum. Traders eye key support levels—$1.90 for XRP and $3.51 for UNI—as critical pivots that could shape the next leg of the market cycle.
5. Macro Developments Amplifying Bitcoin’s Appeal
Beyond Fed policy, macro drivers reinforced bullish sentiment. Optimism around upcoming U.S.–China trade talks in Switzerland provided a risk‑on boost, with Bitcoin climbing 3.6% to $97,014 on hopes of reduced tariffs and improved global liquidity conditions. Additionally, New Hampshire’s recent law permitting up to 5% of state reserves to be allocated to cryptocurrencies with market caps above $500 billion—effectively favoring Bitcoin—underscored growing institutional acceptance at the policy level.
Furthermore, central banks in China and other emerging markets have signaled expanded bond purchases and liquidity injections to counteract trade‑driven uncertainties, indirectly supporting risk assets like Bitcoin. Analysts attribute part of the recent rally to these concerted efforts to stabilize financial markets without exacerbating inflationary pressures.
6. Analyst Perspectives: Bitcoin as a Digital Store of Value
Zach Pandl, Grayscale’s Head of Research, opined that stagflationary pressures—historically detrimental to equities and bonds—could elevate Bitcoin’s role as a scarce digital commodity akin to gold. In a post‑meeting statement, he noted: “The Fed is concerned about stagflation. This outcome is good for Bitcoin,” emphasizing that BTC’s fixed supply and decentralized nature make it an increasingly recognized hedge against policy‑induced uncertainty.
Other strategists, including Bitwise’s Juan Leon, argue that if future Fed communications lean toward dovish rhetoric to counteract economic slowdown, Bitcoin could see accelerated inflows from institutional portfolios seeking non‑sovereign assets. Their research indicates that past periods of Fed hesitancy correlate with outsized Bitcoin returns in subsequent quarters.
7. Looking Ahead: Can Bitcoin Sustain the Momentum?
As the market digests the Fed’s nuanced stance, key indicators will determine Bitcoin’s trajectory: continued inactivity among long‑term holders, rising futures open interest, and evolving macro indicators like U.S. inflation data and trade policy outcomes. A close above $100,000 would not only cement this cycle’s bull case but could also trigger momentum‑driven inflows from algorithmic and discretionary funds.
However, risks remain. A sudden hawkish pivot in response to persistent inflation, or renewed trade tensions escalating into fresh tariffs, could reverse gains. Investors should monitor forthcoming U.S. PCE inflation reports and tariff announcements, alongside on‑chain signals, to gauge whether Bitcoin’s recent strength marks the start of a sustained uptrend or a temporary reprieve in a choppy macro environment.
Conclusion
The May 7 FOMC decision, by spotlighting stagflation risks and maintaining a hold‑pattern on rates, has paradoxically provided a bullish backdrop for Bitcoin. Coupled with strong on‑chain metrics and favorable macro developments, BTC appears well‑positioned to test and potentially surpass the $100,000 threshold. Nonetheless, vigilance is warranted as central bank communications and global trade dynamics continue to shape the delicate balance between inflation control and economic growth.
