Following the Federal Reserve’s third interest rate reduction this year, cryptocurrency markets experienced a recovery. A more substantial surge is predicted by analysts, aligning with the customary post-cut trajectory.
Cryptocurrency markets registered a minor improvement following the United States Federal Reserve’s anticipated interest rate decrease on Wednesday. According to analysts, a more significant rebound could be forthcoming.
Three consecutive reductions in the central bank’s key interest rate, accumulating to 0.75%, have been enacted over a three-month span between September and December.
Despite fundamentally signaling a positive trajectory for cryptocurrencies over the long term, each rate reduction initiated immediate sell-offs. This behavior followed a typical “buy the rumor, sell the news” trend, as was stated by the on-chain analytics firm Santiment on Thursday.
Nevertheless, there is generally an upturn once the initial uncertainty subsides, the firm further noted, which can present reliable opportunities for trading.
“Thus far, this latest rate cut has been no different. Look for a slight level of FUD or retail sell-off to indicate that the mild post-cut downswing has ended.”
Reduced interest rates and diminished expenses associated with borrowing generally heighten the tolerance for risk, causing capital to flow into speculative holdings, with cryptocurrencies being an example.
Fed Rate Cut Seen as Largely Anticipated
Jeff Ko, the chief analyst at CoinEx, informed that the Federal Reserve’s most recent rate reduction was widely anticipated and largely reflected in asset prices. However, the revised “dot plot,” which indicates where Fed governors foresee the future trajectory of the rate, “inclined toward a moderately hawkish stance.”
More significantly, Ko noted that the $40 billion in short-term Treasury acquisitions are merely a technical adjustment for financial system liquidity aimed at decreasing short-term rates, and are not viewed as an expansive, stimulus-driven initiative.
“But the markets interpreted this as mildly bullish, with US stocks moving higher and helping Bitcoin stage a rebound alongside broader risk sentiment.”
Bitcoin Market Structure Grows More Sophisticated
Jurrien Timmer, the director of global macro at Fidelity Investments, examined the protracted timeline, observing on Thursday that Bitcoin (BTC) has displayed underperformance this year when compared to equity markets. Nevertheless, he asserted that markets were exhibiting greater maturity relative to preceding cycles.
“It’s hard to tell in real time whether a new [crypto] winter is upon us, but looking at the evolving wave structure of Bitcoin’s maturing network curve, we can see that the most recent bull market looks pretty mature.”
A modest rise in cryptocurrency markets has been observed during the Friday morning trading period, with Bitcoin rebounding from its plunge below $90,000 after the rate cut to briefly ascend to $93,500 on Coinbase.
Nevertheless, the resistance encountered at this particular price point once more proved to be excessively formidable, resulting in the asset’s retreat to $92,300, the valuation at which it is exchanged at the moment this is being composed.
