A Silent Fed Decision Could Spark the Next Big Bitcoin Rally
Bitcoin experienced a significant decline after the Federal Reserve implemented its second consecutive interest rate cut. Traders reacted to unexpectedly hawkish remarks from chair Jerome Powell, despite the anticipation surrounding what some are calling the “mother of all” Fed pivots. The bitcoin price dipped to approximately $108,000 per bitcoin before bouncing back to just above $111,000, as a “death knell” warning suggested the bitcoin price was teetering on the edge. As Tesla billionaire Elon Musk makes waves with a surprising move, bitcoin and crypto analysts are predicting that a resurgence of liquidity could drive the bitcoin price upward in the coming months.
“The rate cut continues the path of loosening monetary conditions in the U.S. and abroad,” said Alex Blume. “The U.S. government clearly aims to navigate its way out of debt and inflation by fostering growth, rather than resorting to austerity measures.” The Fed has delivered on expectations with a second consecutive 25 basis point interest rate cut, signaling a positive shift for bitcoin and crypto investors as monetary policy begins to loosen.
In his post-announcement press conference, Fed chair Powell cautioned that a “rate cut in December is far from a foregone conclusion,” which significantly lowered market expectations for another cut before the year’s end, as indicated by sources. Previously, the market had priced in a 90% chance of another cut in December, but that’s now shrunk to just 70%. “Our long-stated plan has been to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserve conditions,” Powell stated. “Indicators have unmistakably surfaced that we have attained that benchmark in money markets.” The conclusion of the Fed’s two-year quantitative tightening program has been interpreted by some as an indication of a shift back towards quantitative easing and stimulus initiatives.
“Lower interest rates reduce the opportunity cost of holding digital assets, a weaker dollar enhances their appeal, and increased liquidity tends to drive flows into higher-beta sectors like bitcoin and ethereum,” said Nicholas Roberts-Huntley. “Although the complete impact won’t be immediate, the cryptocurrency market is moving into a more favorable macro environment, and this momentum could assist in driving a consistent increase in the upcoming months.” Paul Ashworth told that the Fed’s next step “will be to begin expanding the balance sheet by roughly $20 billion per month,” enabling the monetary base of the financial system to align with the growth of gross domestic product.
