The Federal Reserve is poised to cut its benchmark interest rate today.

Experts see Wednesday’s Federal Open Market Committee meeting as a key catalyst for crypto prices. Chair Jerome Powell is expected to announce the central bank’s first interest rate cuts in four years.

Bitcoin tends to thrive during periods of low interest rates. Lower borrowing costs incentivise investors toward riskier assets like cryptocurrencies.

Here are the other factors driving the $1 trillion asset’s price.

Fed cuts

Whether or not the cuts catapult Bitcoin’s price depends on how aggressive they are, Alice Liu, lead researcher at crypto data firm CoinMarketCap, told DL News.

The market puts the odds of a 0.25% cut at 37% and a 0.5% cut at 63%.

The former will likely boost crypto markets, but the latter “might signal recession concerns,” Liu said.

“If the rate cut is seen as a response to weakening economic conditions, it could raise concerns about future earnings growth, potentially leading to a short-term pullback” in crypto assets, she added.

Not everyone agrees with that analysis. Mario Altenburger, co-founder of Harbour Industrial Capital, said a half-percentage-point cut will “drive a short-term rally.”

Why? Because he estimated it will lead to more cuts in 2024. A 0.25% decrease will “likely lead to a slight retreat and more risk-off sentiment,” Altenburger told DL News.

Election

The US election will likely also affect Bitcoin’s price and be a source of uncertainty, Dessislava Aubert, senior research analyst at Kaiko, told DL News.

Former President Donald Trump has made several pro-crypto promises, such as pledging to create a national Bitcoin reserve.

Vice President Kamala Harris has not made her views on crypto known. Crypto industry pundits have interpreted this to mean that she will adopt the Biden Administration’s crypto-critical stance.

This has fuelled sentiment surrounding the so-called “Trump Trade.” Bernstein analysts estimate that a Trump win will drive Bitcoin as high as $90,000 this year, while his loss would see the cryptocurrency fall as low as $30,000.

Others, such as Lekker Capital Founder Quinn Thompson, have rejected the idea of the Trump Trade because they say macroeconomic factors — like Fed policy — will have a greater impact.

Still, the election will likely “settle some of the uncertainty regardless of the outcome,” Liu said.

The fourth quarter

Some are more bullish long term.

You “have conditions that are ripe for price action across all markets,” Thomas Perfumo, head of strategy at crypto exchange Kraken, told DL News.

The final quarter of the year has historically been a bullish period for Bitcoin. The period has yielded about 90% price increases between October and December for the past 10 years, Liu said.

“There’s a significant chance that we could see a price pump during the remainder of the year, potentially even pushing Bitcoin towards another all-time high,” Liu said.

Crypto market movers

  • Bitcoin TKTK

  • Ethereum TKTK

What we’ are reading

  • A Fed cut is here. How Bitcoin, Ethereum, and Solana will react — DL News

  • DBS Bank To Launch Crypto Options And Structured Notes For Institutions In Q4 2024 — Milk Road

  • Odds Trump Will Launch a Token Before Election Plummet After X Space — Unchained

  • WalletConnect To Airdrop 185M $WCT With New Token Launch — Milk Road

  • Arbitrum co-founder defends ‘parasitic’ $12bn layer 2s as Ethereum falters — DL News

Eric Johansson is DL News’ News Editor. Got a tip? Email at eric@dlnews.com.