- Federal Reserve Chairman Jerome Powell has hinted at the possibility of further interest rate cuts this year.
- Cryptocurrency markets historically perform better in low interest rate environments.
- Despite the speech, Bitcoin and crypto markets continued their downward trend, with an overall decline of 4.2% in the past 24 hours.
The overall cryptocurrency market continued to trend lower on Monday, even as Federal Reserve Chairman Jerome Powell hinted at the possibility of further interest rate cuts before the end of the year.
Cryptocurrency market declines due to possibility of further interest rate cuts
Federal Reserve Chairman Jerome Powell said Monday that a 50 basis point rate cut should not be interpreted as evidence that future rate cuts will be of the same magnitude.
“If the economy progresses broadly as expected, policy will move toward a more neutral stance over time,” Powell told the National Association for Business Economics. It's not like I'm here,” he said.
Chairman Powell said the economy is strong and he wants to keep it that way. He further pointed out that the decision to cut interest rates by 50 basis points reflects growing confidence in the strengthening of the labor market, which will ultimately lead to lower inflation.
Furthermore, Chairman Jerome Powell hinted at the possibility of further rate cuts that would be determined based on economic indicators. “We will carefully evaluate emerging data, evolving prospects, and the balance of risks when considering further policy adjustments,” Powell said.
Further Fed rate cuts could have a positive impact on the crypto market, as history shows a correlation between Bitcoin prices and lower interest rates.
This trend was especially evident during the 2017 cryptocurrency market bull run and the spike in new coin offerings (ICOs) when interest rates were between approximately 0.75% and 1.25%. However, a market correction began in 2018 as the Federal Reserve began raising interest rates.
The crypto market remains depressed after Chairman Powell's speech on Monday, with the overall market down 4.2% at the time of publication.
Major cryptocurrencies such as Bitcoin, Ethereum, and Solana fell by 3.5%, 2.3%, and 2.6%, respectively.
The artificial intelligence category has also fallen in the past 24 hours, with major tokens such as NEAR, ICP, ASI, RENDER, and GRT all falling along with the rest of the market.
The meme coin category was not left out either, with tokens such as DOGE and SHIB dropping nearly 10% on the day.
This shows that the market has not yet reacted to the Fed Chair Powell news, but the possibility of further rate cuts could draw more investors into the digital asset sector.
Vander, co-founder of Black Swan Capitalist, said the speech could fuel bullish momentum among crypto assets.
“Very positive for risk-on assets like cryptocurrencies. Lower rates = increased credit creation = increased global liquidity = massive bull run in cryptocurrencies. No doubt the timing is by design. There is no room for this,” Wandel said in the X post.
With the Federal Reserve Chairman hinting at the possibility of further interest rate cuts, other members of the crypto community also share their optimism and offer a bullish outlook for Bitcoin.
