The Fed’s pause is a ‘green light’ for investors. Here’s what it means for cryptocurrency:
The U.S. Federal Reserve’s decision to pause and cut interest rates next year will be a “positive boost” to cryptocurrencies and cryptocurrency stocks.
In a Dec. 13 interview with Bloomberg, Blackrock fund manager Jeffrey Rosenberg described the Fed’s interest rate pause and hint of a rate cut next year as a “green light” for investors, with the S&P 500 rising 1.37% on the decision.
“This optimistic mood could persist for some time, at least until new economic data comes out, and until then, the message is clear: the Fed is willing to see financial conditions ease.”
On this day, the stock prices of Coinbase (COIN) and MicroStrategy (MSTR) soared 7.8% and 5%, respectively, and Bitcoin mining company Marathon Digital (MARA) soared 12.6%, and cryptocurrency stocks also surged after this announcement. There was a significant increase.
The perfect storm ⛈️: #Bitcoin bisector;#Bitcoin Spot ETF;
The Federal Reserve has halted interest rate hikes, signaling three cuts in 2024.
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Election year = lower interest rates, along with ️ go brrrrr and increased liquidity.= https://t.co/1grOT1fBig
— John E Deaton (@JohnEDeaton1) December 13, 2023
Henrik Andersson, chief investment officer at investment fund Apollo Crypto, told Cointelegraph that he expects today’s disruption and expectations of a rate cut next year to be a “positive boost” for crypto and cryptocurrency-related stocks.
“As we see BlackRock and Fidelity launching Bitcoin ETFs, we can expect many other traditional financial institutions to enter the cryptocurrency market as well.”
In particular, according to a December 11 report from CoinShares, blockchain stocks recently recorded their largest weekly inflow ever, with a whopping $126 million flowing into cryptocurrency-related stocks.
James Butterfill, head of research at CoinShares, also found that digital asset investment products saw inflows for the 11th straight week, posting another weekly gain of $43 million.
Tina Teng, market analyst at CMC Markets, told Cointelegraph that the Fed’s interest rate freeze will undoubtedly increase market interest in cryptocurrency products.
“This pivot has boosted cryptocurrency stocks in the same way by increasing sentiment about broad risk and improving expectations about future liquidity conditions.”
Related: Bitcoin to Skyrocket to $80,000 in 2024 as Stablecoin Overtakes Visa: Bitwise
Teng said investors can expect to see a similar bullish trend not seen since the previous falling interest rates cycle, due to institutional interest in the spot Bitcoin ETF, with a decision currently scheduled for early January. He said it would be amplified.
However, Anderson added that a side effect of low interest rates could be a cooling of the real asset (RWA) tokenization narrative, and that increased DeFi yields could become more attractive to investors in a low interest rate environment.
“So far, much of the focus has been on tokenizing government bonds. “Now we are seeing an environment where DeFi can generate returns in excess of 10% while traditional returns are heading in the opposite direction,” he added.
Like many market commentators, both Teng and Andersson viewed the upcoming Bitcoin halving, currently scheduled for April next year, as a major catalyst for overall cryptocurrency market growth in 2024.
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