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Most analysts believe that the Fed's policy shift could bode well for Bitcoin and the cryptocurrency market as a whole.
Fed Rate Cut: What it Means for Bitcoin
The Federal Open Market Committee (FOMC), as many economists expected, opted to cut interest rates significantly. The FOMC lowered the federal funds rate to a target range of 4.75% to 5.00%, marking the first rate cut in four years.
“The Committee has increasing confidence that inflation is moving sustainably toward 2 percent and judges the risks to achieving its employment and inflation objectives to be roughly balanced,” the press release said. “The economic outlook is uncertain, and the Committee is paying close attention to risks to both sides of its dual mandate.”
Historically, interest rate cuts have been viewed as bullish for Bitcoin, as monetary easing generally weakens the US dollar and increases demand for risk-on assets like BTC. In other words, the more investors are willing to take on risk, the more they will want to put more money into the space, which could drive Bitcoin prices higher.
 The price of the first cryptocurrency surpassed the $61,000 mark immediately after the Fed's announcement, but has fallen to around $59,616 at the time of writing, down 0.9% from the previous day.
Federal Reserve Chairman Jerome Powell called today's rate cut a “recalibration” at the meeting. While recent economic data suggests the economy continues to expand, he argued that “upside risks to inflation have decreased and downside risks to employment have increased.”
Market participants had been eagerly anticipating a rate cut after Chairman Powell declared at last month's Jackson Hole Symposium that “the time has come to adjust policy” in the wake of moderating inflation and surging unemployment. But traders are divided on whether the Fed should slash borrowing costs by 25 basis points or opt for a larger cut of 50 basis points.
Analysts predict short-term turmoil
Analysts at Singapore-based QCP Capital expect the Fed's decision on Wednesday to have a significant impact on financial markets, especially predicting increased short-term volatility following such a big rate cut.
“We believe volatility will be high in the days following the meeting as traders recalibrate their positions over the coming weeks and the regime change could also signal the start of a strong macro trend,” QCP noted.
Strategists expect Bitcoin prices to fall in the short term but urge investors to focus on the long term.
“Drawdowns and high volatility are expected, but this should not detract from Bitcoin’s path to higher prices. We favor a long-term structure with unlimited upside potential to capitalize on a potential surge in Bitcoin price,” the QCP analysts continued.
