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How will the U.S. key rate cut affect the cryptocurrency market?
After the speech of U.S. Federal Reserve Chairman Jerome Powell on August 22, the likelihood of a key rate cut in America increased, and this event may affect the cryptocurrency market.
Among experts, there are two opposing opinions regarding the consequences of lowering the key rate. A trader known under the pseudonym Ash Crypto is among the supporters of a bullish rally:
In the fourth quarter of this year, the U.S. federal government will turn on the printing press. Combined with two likely rate cuts, this will trigger a capital inflow of several trillion dollars into the crypto market. We are on the verge of a phase of parabolic growth in altcoin prices, during which they will increase 10–50 times.
The head of the research department at 10x Research, Markus Thielen, holds a different view and believes that a rate cut, on the contrary, will lead to a drop in the value of virtual currencies amid concerns about an economic recession. In this case, only Bitcoin, considered digital gold, may count on an inflow of investments.
Analysts at Santiment also do not rush to celebrate the news of a possible key rate cut. In their opinion, the euphoria caused by this announcement has most likely peaked and will soon decline. Therefore, traders’ bullish sentiment may come to an end. In addition, the rise in stock prices triggered by Powell’s speech may shift investors’ focus from digital assets to the appreciating securities of U.S. companies.
Number of discussions on U.S. monetary policy (blue chart).
Given these factors, it makes sense to prepare for the beginning of a bearish trend, which should occur in the cryptocurrency market this fall, according to the theory of cycles. The downward trend has long been overdue, as the level of digital asset capitalization has been growing since January 2023, undergoing only short-lived corrections.
See also: "Bitcoin price today: dropped below $113K, near 6-week low despite Fed rate cut expectations"
