The Federal Reserve, the central bank of the United States, cut the federal funds rate by 0.50 percentage points to a target range of 4.75% to 5% on Wednesday, September 19, 2024, U.S. time.
This rate cut marks the first in four years and reflects a significant shift in the Fed’s approach to economic growth and inflation, triggering immediate reactions in the cryptocurrency market.
Bitcoin Prices Following the Announcement
After the Fed’s rate cut announcement, Bitcoin’s price experienced volatility. Initially, it dropped by 1.7% to around $60,000 before rebounding to surpass $61,000 in the past 24 hours. Other cryptocurrencies like ETH, SOL, BNB, DOGE, and TON also saw price increases within the same timeframe.
This rate cut is viewed as a potential catalyst for a bullish phase in Bitcoin and other cryptocurrencies. Lower interest rates tend to reduce the opportunity cost of holding assets like Bitcoin, which doesn’t generate interest.
According to Decrypt, James Butterfill from CoinShares highlighted that lower borrowing costs could support Bitcoin’s price if the trend of monetary easing continues.
Zach Pandl from Grayscale also noted that the Fed’s approach could drive investors toward assets like Bitcoin, which are seen as stores of value, especially during times of economic uncertainty.
The recent inflows into Bitcoin exchange-traded funds (ETFs) indicate growing investor interest. Data from Arkham Intelligence revealed that U.S. funds added around $250 million in Bitcoin in one day, demonstrating a significant increase in demand.
This trend suggests that investors are increasingly viewing Bitcoin as a hedge against economic uncertainty and shifting monetary policies.
The Federal Open Market Committee (FOMC) acknowledged that inflation is nearing the 2% target, though it remains somewhat high. The rate cut aims to support economic growth and stabilize the labor market. Fed Chairman Jerome Powell described the move as a “recalibration” and emphasized that this doesn’t signal victory over inflation.
He stressed the need for a cautious approach going forward, stating, “We’re not saying the mission is accomplished, but we are encouraged by the progress we’ve made.”
The Fed’s economic projections indicate that the federal funds rate may hover around 4.5% by the end of this year and drop to around 4% by the end of 2025.
Read : Bitcoin Price Outlook U.S. Interest Rate Decision (dinodapps.com)
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