Bitcoin’s performance has sharply declined following the release of the Federal Open Market Committee (FOMC) minutes from the January 28 meeting, marking it as the most significant underperformer in the current economic landscape. In contrast, the US dollar index and bonds have experienced a notable rally, further highlighting the shifting dynamics in financial markets.
The January FOMC meeting showcased a divided Federal Reserve, with two members advocating for more dovish stances amidst the prevailing economic conversations. While a majority of policymakers agreed to hold the federal funds rate in the range of 3.50% to 3.75%, a few members voiced support for a 25-basis-point cut, citing concerns over restrictive policies and potential risks in the labor market.
Several officials pointed out that if inflation trends down as anticipated, additional rate cuts could become appropriate. However, others raised alarms about the dangers of easing monetary measures too soon, particularly in an environment of elevated inflation which could jeopardize the Fed’s long-term target of 2%. There was also a call for “two-sided” guidance, as some members suggested that interest rates might need to increase if inflation remains persistently high.
Recent macroeconomic indicators have largely bolstered Fed Chair Jerome Powell’s cautiously optimistic outlook. Growth figures have surprised on the upside, inflation seems to be on a downward trajectory, and stability appears to be returning to the job market. These positive trends have led to increasing expectations for rate cuts in 2026, although the possibility of any move in March has been effectively ruled out following last week’s unexpectedly strong payroll report.
Concerns about market vulnerabilities were also prominent during the FOMC discussions, with various participants emphasizing risks within private credit and the greater financial system. Analysts believe these worries, mixed with the Fed’s hawkish tone, have spurred safe-haven buying in both bonds and the US dollar, while Bitcoin has continued to struggle under downward pressure.
In equity markets, there were modest gains observed, with the Dow Jones Industrial Average rising by 0.24%, the S&P 500 up by 0.59%, and the NASDAQ increasing by 1.00%. These movements reflect a cautious optimism among investors, driven by the latest signals from the Fed. A senior market strategist commented, “The minutes show a Fed still divided but attentive to both inflation risks and growth momentum. Bitcoin’s underperformance is partly a reflection of risk-off sentiment and the dollar’s continued strength.”
Looking ahead, investors are likely to monitor any additional remarks from Fed officials closely, as they navigate the delicate balance between hawkish vigilance and dovish optimism, which will be crucial in shaping the monetary policy trajectory for 2026.
