On Tuesday evening, Bitcoin and Ethereum lost about 2% of their price. Even worse for $SOL and $XRP , both tokens fell by approximately 4%. The sharp downward movement began after the release of the May protocols from the U.S. Federal Reserve.
The Fed warned that the economic forecast is becoming increasingly alarming. This is what triggered the correction in the crypto market.
The Fed does not know how to fight inflation
The protocols state that the situation may hit a dead end: inflation is rising, unemployment is also rising, and conventional measures are no longer suitable. Raising rates in such an environment would mean damaging the economy, but leaving everything as it is is also not an option.
Additional tension is created by foreign policy. The document mentions tariffs that the Trump team plans to introduce. Although the 145% tariff on Chinese imports has been postponed for now, the Fed acknowledges that uncertainty still remains.
Officials specifically noted the jumps in the bond market before the meeting. Rising yields, in their opinion, could undermine confidence in the dollar and impact the stability of the financial system. Such issues now require constant attention.
Federal Reserve experts also revised their economic forecast. They estimate that inflation will rise faster than expected this year, and the unemployment rate may remain above 4.6% for a long time. This was previously referred to by the Fed as the 'natural level of employment.'
The interest rate was decided to remain unchanged. It stayed in the range of 4.25 to 4.5%. Fed Chairman Jerome Powell indicated that the regulator will not rush into decisions until it becomes clear how trade measures will affect the economy.
The reaction of the crypto market was swift: traders began to reduce risks. The total market capitalization declined, and futures rates became ambiguous, with some platforms recording growth while others saw a decline.
Growth is slowing down, but inflation is not going anywhere. In such conditions, digital assets are particularly sensitive to interest rate fluctuations. Any change in the Fed's rhetoric could provoke movement.
The next meeting is scheduled for June 17–18. Until then, the crypto market is likely to remain volatile, especially if fresh statistics confirm concerns about stagflation or a prolonged pause in rate cuts.
Everyone is now waiting for new economic forecasts and signals: how exactly the Fed will behave if both prices and unemployment rise simultaneously.
