Bitcoin Surges 5.4% as Fed Pledges Liquidity Amid Tariff Volatility

Bitcoin's price experienced a notable surge in the past 24 hours, coinciding with the Federal Reserve's announcement of its readiness to provide liquidity if market conditions deteriorate. Susan Collins, the president of the Boston Federal Reserve, stated that the central bank is prepared to use its tools to stabilize financial markets if necessary. This assurance came as a response to the market's reaction to President Trump’s tariff policies, which have caused significant volatility in equity, bond, and cryptocurrency markets.

The correlation between cryptocurrency markets and traditional finance has been evident during periods of economic uncertainty and central bank policy discussions. Bitcoin's price movement appears to be occurring in tandem with traditional financial markets, which have been processing both the implications of Trump’s tariff policies and the Federal Reserve’s statements about potential interventions. This has led to a market-wide bounce, with Bitcoin recording a 5.4% gain and Ethereum gaining close to 3%, restoring it to the $1,500 mark.

Collins emphasized that emergency interest rate cuts would not be the primary response to market functioning issues. She noted that the core interest rate tool used for monetary policy is not the only tool in the toolkit and probably not the best way to address challenges of liquidity or market functioning. Boston Fed president Eric Rosengren suggested that any action would be reliant on the conditions seen, implying that intervention could differ if markets were under pressure.

Federal Reserve officials have expressed concerns about the economic impact of President Trump’s tariffs. John Williams, head of the New York Fed, warned that the tariffs could trigger several negative economic effects, including sending inflation sharply higher, increasing unemployment, and significantly weakening the country’s economic growth. Susan Collins echoed these inflation concerns and stated that she expects inflation could well be above 3 percent this year as a result of the tariff implementations.

Despite the positive market reaction to the Federal Reserve’s liquidity guarantees, the economic impact of the tariffs remains a concern. Collins mentioned that the Fed has additional standing facilities that can help to support market function, suggesting preparedness for various scenarios that might develop. As the market reacted positively to the Federal Reserve’s statement, China increased its tariffs on US goods to 125%.