Market players are overwhelmingly anticipating an interest rate cut at the US Federal Reserve meeting on Wednesday.
That means rate cuts are already priced in to markets, helping so-called risk-on assets surge higher.
But the Fed might adopt a “more hawkish tone” in the meeting, which could dampen the crypto rally, Haider Rafique, Global CMO of OKX told DL News.
That would signal more aggressive moves from the Fed.
But, he added: “Investors should remain vigilant, as the Fed’s policy decisions are influenced by multiple factors, including inflation rates and economic resilience.”
In the meantime, lower interest rates will shore up confidence in assets including crypto, André Dragosch, European head of research at Bitwise, told DL News.
“An increase in liquidity should benefit altcoins relatively more than Bitcoin as investors move further out the risk spectrum,” he said.
Altcoins have been on a tear. XRP has stood out with its price skyrocketing 300% since Donald Trump’s election win pumped the hype around an inbound crypto-friendly administration.
Both Bitcoin and Solana have hit new highs since November 5, and analysts say it’s just the beginning.
Ethereum has yet to beat its 2021 $4,878 high, but it blew past $4,000 for the first time in months earlier in December and experts say it could hit $10,000 in 2025.
Fed cut
CME Group’s FedWatch tool gives a 95% chance that the Federal Reserve will cut interest rates by another 0.25% on Wednesday.
Dragosch says that it will probably not be the last cut due to a combination of a strong US dollar — bolstered by Trump’s election — and weaker labour market numbers. Unemployment rose in November.
“The Fed needs to cut even more aggressively going forward to prevent financial conditions from tightening further,” he said.
James Butterfill, head of research at CoinShares, echoed the sentiment.
He’s also anticipating interest rate cuts on Wednesday, telling DL News they will “likely provide further support for crypto prices.”
Crypto market movers
Bitcoin is down 1.4% over the past 24 hours to $105,103.
Ethereum is down 2.6% over the past 24 hours to $3,887.
What we’re reading
Australia slaps Binance with lawsuit alleging it let retail customers trade risky derivatives — DL News
Are these top performers in you portfolio? — Milk Road
Pudgy Penguins See NFT Floor Price Drop Almost 50% After PENGU Launch — Unchained
Why everyone is so hyped on $PENGU— Milk Road
XRP seen getting an ETF next year as Bitcoin fund ranks biggest ever — DL News
Pedro Solimano is a markets correspondent based in Buenos Aires. Got a tip? Email him at psolimano@dlnews.com.
