If the Federal Reserve maintains interest rates in 2025, it will have multiple adverse effects on the cryptocurrency market. The analysis based on key information from search results is as follows:
Dollar liquidity tightening suppresses risk appetite
The Federal Reserve's decision not to cut interest rates means that real dollar interest rates will remain high, suppressing the flow of global capital into high-risk assets. According to data from the Chicago Mercantile Exchange, market expectations for interest rate cuts in 2025 have been reduced from two to one. If there are no cuts throughout the year, the dollar index may break through the 110 level, leading to accelerated capital withdrawal from the cryptocurrency market. Historical data shows a significant negative correlation between the dollar index and Bitcoin prices (correlation coefficient of -0.7), and a stronger dollar will directly suppress cryptocurrency prices.
High-leverage markets face systemic risks
Currently, the scale of open contracts in the cryptocurrency market exceeds 34 billion dollars. If the Federal Reserve maintains high interest rates, rising borrowing costs will force leverage traders to close positions passively. For example, the funding rate for Bitcoin perpetual contracts has been negative for two consecutive weeks, indicating that short positions dominate. If the price falls below a key support level (such as 90,000 USD for Bitcoin), it could trigger a chain liquidation of up to 20 billion dollars, exacerbating market panic.
Institutional capital inflow is obstructed
The Federal Reserve's pause in cutting interest rates will weaken the appeal of compliant crypto products. The Grayscale Bitcoin Trust (GBTC) has recently seen an average daily net outflow of 300 million dollars. If interest rates remain high, institutions may further reduce their allocation to spot ETFs. Additionally, a high-interest environment will compress the interest spread of crypto lending protocols (such as Compound and Aave), leading to a decrease in total value locked (TVL) and weakening the liquidity foundation of the DeFi ecosystem.
Strengthened expectations of macroeconomic stagflation
The Trump administration's tariff policy (such as a 25% tariff increase on China) has raised U.S. inflation expectations, with consumers' expectations for inflation over the next year surging to 6% in February. Bitcoin may correct to below 80,000 USD this year.
Regulatory risks and policy spillover effects
The Federal Reserve's hawkish stance may accelerate stricter global regulation. The proportion of hawks among the Federal Reserve committee members in 2025 is increasing (such as Schmid and Moussailem), and if the dollar remains strong, cross-border arbitrage funds will flow back from the Eurozone to the United States, further draining liquidity from the cryptocurrency market.
Conclusion
The Federal Reserve's decision not to cut interest rates will impact the cryptocurrency market through five mechanisms: dollar liquidity contraction, exposure of leverage market vulnerabilities, decreased willingness of institutions to allocate, reinforced stagflation risks, and increased regulatory uncertainty. Investors should pay close attention to the June CPI data and the speeches of Federal Reserve committee members (such as Bostic and Harmack). If there are no clear signals of inflation retreat, it is advisable to reduce positions in high-risk altcoins and increase holdings in stablecoins to avoid volatility.