Financial markets have just received an injection of adrenaline, and cryptocurrencies traditionally react mostly to every positive signal from the mainstream of finance. Jerome Powell and his team from the Fed (Federal Reserve) have just made a decision that may prove to be crucial for a further increase in digital assets – interest rates in the US fall by 25 base points, landing at 4.00-4.25%.
Fed lowers your feet – cryptocurrencies react quickly as always
Just a few minutes after Powell’s decision was announced, the king of cryptocurrencies already made himself felt. Bitcoin, Ethereum and XRP almost immediately noted increases (maybe small but symbolic). This is a classic of the genre, because the cryptocurrency market is never waiting with a reaction to macroeconomic events.
Why? The answer is simpler than Bitcoin blockchain. Lower interest rates mean cheaper capital, less attractiveness of traditional savings instruments and a greater risk appetite among investors. Where are the risk looking for? Of course in digital assets.
Analysts see more cuts in the horizon
PKO BP experts, by publishing a report before the Fed meeting, pointed to the possibility of further foot reduction. Their forecast? By the end of the year, the Fed can reach for scissors twice, bringing feet to 3.50-3.75%. If it works, cryptocurrencies may have even more reasons for joy. It is worth adding that the editorial colleague Jacek indicated today that the cuttings of the feet would be 25 PB and that such a scenario is already included in the price.
Macroeconomics vs. Crypto – a dangerous relationship
Paradoxically, the market, which was to be independent of traditional finances, is becoming more and more dancing to the rhythm of the decisions of central banks. Bitcoin, originally designed as an alternative to the financial system controlled by governments, today reacts to every blink of Powell like a teenager on a message from first love.
Is that good or bad? This is an economic and philosophical matter. The fact is that the correlation between traditional markets and crypto has become a reality that we have to reckon with.
Prospects for the coming months
If the Fed actually maintains its mild tone and continues to cut the feet, cryptocurrencies may be in a favorable macroeconomic environment. The lower feet mean:
- Cheaper capital cost for speculative investments
- Greater capital flow for risky assets
- Weaker USD (potentially), which historically favored Bitcoin
- Increased interest in alternative assets
Caution will never hurt
Remember, however, that euphoria can be short -lived. The cryptocurrency market is famous for its volatility, and what today looks like the beginning of the rally can only be a temporary correction down. In addition, the geopolitical situation, regulations (which are constantly evolving) and moods among whales may at any time outweigh the scales in the opposite direction. That is why it is so important to invest in digital assets and do not give fomo.
Foot down, BTC charts and Altcoins up!
The FED decision on a reduction of foot is undoubtedly a positive signal for cryptocurrencies in a short term. The reaction of Bitcoin, Ethereum and other Altcoins shows that the market remains sensitive to macroeconomic impulses. Is this the beginning of a new growth wave? Time will tell.
The following months can be extremely interesting for everyone who holds digital assets in their wallets. Fed gave green light, now the question remains: when is BTC for USD 150? 😉
