Fed Expected to Hold Rates Steady at May 2025 FOMC Meeting, Crypto Markets Remain Cautious

Polymarket traders are currently assigning a 98.2% probability that the Federal Reserve will maintain current interest rates at the May 2025 Federal Open Market Committee (FOMC) meeting scheduled for today, with only a minimal 1.6% chance of a 25 basis point increase[1]. This strong consensus suggests that major volatility tied to U.S. monetary policy is unlikely in the immediate term, though crypto markets remain cautious ahead of the announcement.

The Federal Reserve’s decision comes at a critical time for both traditional and cryptocurrency markets, with the crypto market capitalization having rebounded to approximately $2.9 trillion in recent weeks, recovering from a low of $2.4 trillion in early April[3]. Bitcoin has recently taken a pause after a bullish surge, with traders carefully analyzing whether this represents a temporary consolidation or a more lasting pause in the upward momentum[2].

Economic Factors Influencing the Fed Decision

The Federal Reserve’s cautious approach to monetary policy is primarily driven by persistent inflation pressure, which contributed to a 0.3% contraction in GDP during Q1 2025, alongside a steady rise in jobless claims[5]. These economic indicators have created a complex environment where the Fed appears reluctant to adjust rates despite previous market expectations for potential cuts in 2025.

Current expectations widely suggest that the federal funds rate will remain at 4.25%-4.50% following today’s meeting. Any unexpected commentary from Fed Chair Jerome Powell during the post-meeting press conference could trigger significant market movements, as even small surprises in tone or forward guidance can impact risk asset pricing, including cryptocurrencies[5].

The decision is particularly consequential for the crypto market as digital assets historically respond sharply to Fed announcements and changes in monetary policy outlook. A decision to hold rates steady as expected may temporarily dampen investor hopes for near-term monetary easing, potentially increasing short-term volatility while providing longer-term stability if inflation concerns begin to ease.

Potential Crypto Market Implications

For crypto traders, the strong consensus around unchanged rates suggests a relatively neutral backdrop for risk assets like Bitcoin and Ethereum in the immediate aftermath of the announcement. Stable interest rates generally maintain current liquidity conditions, which can be interpreted as neutral-to-positive for cryptocurrency valuations[1].

Major crypto-related stocks could see positive momentum if the Fed decision aligns with expectations. Coinbase (COIN) is currently trading at approximately $215 as of today, while MicroStrategy (MSTR) and other crypto-adjacent equities may experience upside if market conditions remain favorable following the announcement[1].

However, some traders are cautious about the potential impact of seasonal trends. The traditional market adage “Sell in May and go away” reflects historical patterns of weaker market performance from May through October. Historical data indicates this seasonal weakness could affect crypto markets as well, potentially challenging Bitcoin’s push toward the symbolic $100,000 milestone that many analysts have targeted for mid-2025[4].

Beyond the Fed decision, crypto investors should also monitor the Bank of Japan’s upcoming release of minutes from its March policy meeting on May 8. While the BoJ has maintained its ultra-loose monetary policy with a 0.5% interest rate, global trade uncertainties have led to revisions in growth and inflation forecasts. Although the Japanese yen’s direct correlation with Bitcoin is limited, global liquidity conditions and investor sentiment are influenced by the monetary stance of major central banks, potentially affecting cryptocurrency valuations in the coming weeks[5].