The cryptocurrency market has been under close scrutiny since the Federal Reserve decided to keep interest rates unchanged at its March meeting. But it suggested three rate cuts would occur. However, according to Bloomberg, Atlanta Fed President Rafael Bostic has said that only one rate cut is currently being considered this year, and that it will probably come later than he expected.
Fed's views on the past three rate cuts
The change in expectations about the Fed's rate-cutting trajectory comes at a time when markets were already pinning expectations on future rate cuts. The market has priced in about three rate cuts in 2024 since December 2023, with the first rate cut expected at the March meeting. However, economic data and repeated criticism from Fed officials themselves have sharply lowered those expectations. Similarly, the originally expected rate cut in June was postponed further until September. This could put pressure on the cryptocurrency market.
Federal Reserve Chairman Jerome Powell has said in the past that he does not believe a recession is imminent in the U.S. economy. However, he noted that there is uncertainty about the future course of inflation and it is difficult to predict when central banks will cut interest rates to boost current growth.
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Why is this important for the crypto market?
Investors have historically relied heavily on the Federal Reserve's interest rate choices when valuing assets. Lower interest rates often cause the value of government bonds to fall, which makes Bitcoin and other crypto assets more attractive. With the expected volatility in the crypto market as a result of the Fed delaying interest rate cuts, investors may decide to stick with traditional assets for now. However, on the positive side, a strong economy keeps investor demand high. Countries with prosperous economies typically have stable purchasing power and favor riskier investments. In this situation, the Fed's decision is unlikely to halt the current growth rate of the crypto market.
