What happened?
The global cryptocurrency market capitalization increased by 2% to $4.2 trillion, primarily driven by Bitcoin’s steady rise toward $118,000 after the Federal Reserve made its first interest rate cut of the year. Despite the central bank’s guarded tone about future policy moves, collateral impacts were seen as Bitcoin traded 1% higher at $117,426, and Ether and XRP rose by 2.8% and 2.9% respectively.
Who does this affect?
This development impacts cryptocurrency traders, investors, and blockchain projects. Traders had anticipated the Fed’s decision, which had a 96% probability. Andrew Forson, president of DeFi Technologies, suggests that lower borrowing costs could result in increased capital flow into digital assets. Also, staking products and blockchain projects might become viable alternatives to traditional bonds.
Why does this matter?
This matters due to the potential market impact. Historically, cryptocurrency rallies often follow rate cuts after a delay. The cautious stance adopted by Fed Chair Jerome Powell, combined with uncertainty surrounding inflation and growth, has kept short-term volatility subdued even though risk asset sentiment is improving. Liquidity-sensitive assets are expected to perform well if the easing cycle continues, indicating that the Fed’s decisions can significantly influence the cryptocurrency market.