The Federal Reserve cut interest rates by 25 basis points on Wednesday evening to a range of 4.25% to 4.50%. This decision is in line with economists’ and markets’ expectations and marks the third reduction in a row.
In its statement, the Fed indicated that inflation is making progress, but still above the 2% target. The labor market has also cooled down somewhat, although unemployment remains historically low. Further interest rate cuts remain dependent on new economic data and broader economic conditions.
Positive signal for crypto?
Lower interest rates lower the cost of borrowing and make riskier assets more attractive, such as stocks and cryptocurrencies. This could lead to an influx of liquidity to the crypto market. Bitcoin has benefited from this trend in previous rate cuts, with investors looking for returns in the crypto industry.
Analysts point to an increase in institutional involvement, with CME Bitcoin futures surging towards record levels. According to K33 Research, Bitcoin futures premiums have risen to levels not seen since November 2023, indicating strong institutional optimism.
Increasing interest in Bitcoin
The decision of the US Financial Accounting Standards Board (FASB) also plays a role: companies can now report unrealized profits on Bitcoin directly on their balance sheet, which makes it more attractive for companies to hold the digital currency. Additionally, QCP Capital expects current regulatory momentum and broader economic sentiment to pave the way for further Bitcoin adoption.
Outlook remains mixed
Despite the optimism, analysts remain cautious. The options market still shows a preference for put options, indicating a certain caution among investors.
The recent rise in Bitcoin is therefore viewed with some caution, given the volatility of the market and the unpredictability of further economic developments. Still, the interest rate cut remains a positive signal for the crypto market, and investors are eagerly awaiting further interest rate policy from the Fed in 2025.
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Source: https://newsbit.nl/fed-verlaagt-rente-wat-betekent-dit-voor-de-cryptomarkt/
