Bitcoin Faces Uncertainty as First Fed Rate Cut in Years Looms
Steno Research has highlighted Bitcoin’s limited experience with U.S. interest rate cut cycles, noting that the cryptocurrency has only been through one such cycle, which began in 2019.
During that time, Bitcoin dropped around 15% between the Federal Reserve’s initial rate cut in August and November’s cumulative 75 basis point reduction. It wasn’t until the massive monetary stimulus during the COVID-19 outbreak in March 2020 that Bitcoin hit its lowest point and then began its surge.
As the next Federal Open Market Committee (FOMC) meeting approaches on September 18, the possibility of the first rate cut in the current cycle looms. Market predictions suggest a 54% chance of a 25 basis point cut, with a smaller 46% chance of a 50 basis point cut, although Steno Research views the latter as less likely, especially following a stronger-than-expected Consumer Price Index (CPI) report.
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The U.S. interest rate plays a crucial role in shaping risk tolerance among investors, particularly in the crypto market. According to Steno Research, with the Fed’s interest rate sitting at 5%, investors would likely avoid digital assets unless they expect much higher returns due to the increased risks.
Steno Research’s analysis also found that higher global yields tend to negatively impact Bitcoin and Ethereum prices, while lower interest rates typically improve U.S. equities and corporate credit, which can indirectly benefit the broader crypto market.
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
