The US Federal Reserve (Fed) cut its benchmark interest rate by 50 basis points to a range of 4.75%-5% at 1am this morning (September 19), marking the first rate cut in four years after the central bank's most aggressive rate hike cycle.
“The Committee has increased confidence that inflation is moving toward 2 percent and judges that risks to achieving its maximum employment and inflation goals are roughly balanced,” the Fed’s press release said. “The economic outlook remains uncertain, and the Committee is mindful of risks to both of its dual goals.”
According to the Fed's quarterly economic projections, members expect the average federal funds rate to fall to 4.4% by year-end, reflecting another 50 basis point cut at the next two Federal Open Market Committee (FOMC) meetings, up from just one cut forecast in June.
“The U.S. economy is in a good place and our decisions today are designed to keep that going,” Fed Chairman Jerome Powell said in a post-meeting press conference. He said that unemployment at “anything below 4% is a good labor market” and that he did not see any evidence that “the likelihood of a recession or slowdown is increasing.”
He also stressed that the Fed has not declared victory over inflation yet, and that the 50 basis point cut should not be seen as a “new pace” for further rate cuts, reiterating the Fed’s data-dependent approach.
Fed Chairman Jerome Powell speaks during a press conference following the September FOMC meeting on September 19, 2024 in Washington, DC.
Immediately after the FOMC decision, US stocks erased all of the early gains from the Fed's decision, with the Nasdaq 100 and S&P 500 closing down 0.3%. Gold initially surged to an all-time high above $2,600 before falling back to end the day in the red.
The U.S. dollar index (DXY) fell to 100.3, its weakest level since July 2023, before rebounding to 101. It is a key indicator for tracking the prices of risk assets, according to CoinDesk analyst James Van Straten.
Crypto-related stocks also lost steam. Shares of MicroStrategy (MSTR) rose 1.5% on the day, while cryptocurrency exchange Coinbase (COIN) and investment firm Galaxy (GLXY) were flat or down slightly, as were most Bitcoin mining companies including Marathon Digital (MARA) and Riot Platform (RIOT).
“The Fed met market expectations with a 50 basis point rate cut,” said Joel Kruger, market strategist at LMAX Group. “Our concern from here will be the market’s ability to continue to feel good about buying risk assets based on further Fed easing when it has already been priced in to this extent.”
If we look at it positively: Good news, the FED is cutting interest rates, money will flow strongly into investment sectors. If we look at it negatively: Worry, the FED is cutting interest rates too strongly, they are afraid of economic recession. These two streams of thought are fighting in the market and we need to wait at least 1-2 more days to see the trend clearly.
Cryptocurrency correlations with other risk assets have risen to their highest levels in about 18 months, David Lawant, head of research at FalconX, noted in an email. “This suggests that macro factors are becoming increasingly important, especially during regime transitions like the current one,” he said.
Markets have been expecting monetary policy to ease from September, with Chairman Jerome Powell saying at the Jackson Hole conference last month that “it is time to adjust policy” with inflation cooling and unemployment rising. However, traders have been divided on whether the Fed will cut rates by 25 basis points or opt for a larger 50 basis point cut. Ahead of Wednesday’s decision, the CME FedWatch Tool showed markets were pricing in a 40% chance of a small cut and a 60% chance of a larger cut.
This uncertainty has set the stage for a volatile trading session, with crypto market maker Wintermute predicting a 2%-3% price swing for Bitcoin in either direction following today’s decision.
Arthur Hayes, co-founder of BitMEX and CIO of Maelstrom, said in an interview that Fed rate cuts could crash the market due to the narrowing of the spread between borrowing rates between the US dollar and the Japanese yen. This would lead to investors closing out their yen-denominated loans en masse. Notably, a similar move triggered the August 5 crash in stocks and digital assets, briefly pushing BTC below $50,000.
Bitcoin holds $60,000
Following the Fed's announcement, Bitcoin rose 1.2% to $61,400 before falling below $60,000, currently trading at $61,386. Bitcoin is trading in a tight range, with the price finding support around $59,000 and minor resistance near $61,230.
Despite the brief volatility following the FOMC announcement, Bitcoin has been more stable. Key moving averages, including the 7-period moving average (MA) at $60,280.1 and the 99-period MA at $60,075.3, suggest that market sentiment is cautiously neutral.
BTC 1-hour price chart | Source: TradingView
Despite the current reversal, analysts warn that similar volatility could continue in the coming days. Historical patterns show that the cryptocurrency market often reacts strongly to macroeconomic news but may undergo corrections as the market digests the longer-term impacts.
Altcoins struggle to recover
Altcoins suffered more heavily than Bitcoin on the day, with most falling and only recovering after the FOMC meeting.
Ethereum (ETH) traded below $2,300 for most of the day before attempting to recover following the Fed announcement. At the time of writing, ETH is trading at $2,337, down 0.16% over the past 24 hours.
BNB fared somewhat better, gaining 0.88% on the day to trade at $550.05, while Solana (SOL) reversed intraday losses and gained 0.19% to $131.60.
Meanwhile, XRP is down 0.60% and is currently at $0.581, while Dogecoin (DOGE) is trading at $0.1024, up 1.45%.
Toncoin (TON) saw a significant gain of 2.12% to $5.63, while Tron (TRX) fell 0.54% and is currently priced at $0.1492. Completing the top 10 list, Cardano (ADA) edged up 1.26% to $0.3375, and Avalanche (AVAX) fell 0.01% to trade at $23.86.
Source: https://tapchibitcoin.io/bitcoin-phan-ung-sau-khi-fed-cat-giam-lai-suat-50-diem-co-ban.html