On September 18, the US Federal Reserve announced a significant 50-basis-point reduction in the benchmark interest rate, bringing it to a range of 4.75%–5.00% for the first time in four years. This decision, aligning with Wall Street expectations, is expected to have profound effects across various financial markets, including cryptocurrencies.
Marc P. Bernegger, co-founder of AltAlpha Digital, has predicted that the cut in the federal funds rate could substantially elevate cryptocurrency prices. He noted that lower interest rates would enhance financial system liquidity, enticing investors toward riskier assets like cryptocurrencies. “This could serve as a catalyst for a year-end rally,” Bernegger added, emphasizing that reduced borrowing costs are likely to encourage more investments in digital currencies.
Historically, declining interest rates tend to lift asset prices by making borrowing cheaper and fostering a more positive investor sentiment. Increased liquidity following the rate cut could drive up demand for cryptocurrencies, potentially boosting their prices. Bernegger believes this rate reduction might improve market sentiment and contribute to a broader bullish trend within the crypto sector.
Julio Moreno, head of research at CryptoQuant, pointed out that data from Bitcoin perpetual futures indicates traders are positioning for a potential price increase. He observed low exchange inflows, suggesting that traders are not in a hurry to sell, which reflects a sense of cautious optimism about future price movements.
However, Moreno also noted a decline in open interest, signaling that some traders might be closing long positions to realize profits. This suggests a complex market response, with profit-taking occurring alongside an overall optimistic outlook.
In summary, the Federal Reserve’s recent rate cut is expected to play a significant role in shaping the future of cryptocurrency markets, fostering an environment conducive to potential price increases.
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