US interest rate cuts bring many benefits to the cryptocurrency market:
1. Increased investment attractiveness
The Federal Reserve's interest rate cuts will lower the yield on dollar assets. At this point, investors seeking higher returns may turn their attention to the cryptocurrency market, thereby increasing investment demand and pushing up cryptocurrency prices.
2. Strengthened safe-haven attributes
Digital currencies like Bitcoin are often considered safe-haven assets that hedge against economic uncertainty. Interest rate cuts often indicate downside risks to the economy, leading investors to hedge potential economic or market risks by reallocating some assets to digital currencies.
3. Increased market liquidity
Interest rate cuts will increase global market liquidity, and some funds may flow into the cryptocurrency market, thus enhancing the trading activity, market liquidity, and trading volume of digital currencies. However, this may also lead to increased market volatility.
4. Improved regulatory environment
After Trump took office, efforts were made to create a friendly regulatory environment for digital currencies, appointing relevant individuals to promote the development of the crypto industry. This is a favorable policy for digital currencies and can enhance market confidence and expectations.
5. Increased demand for cross-border transactions
Exchange rate fluctuations caused by interest rate cuts may encourage investors to use digital currencies for cross-border transactions to avoid capital controls. The increase in cross-border capital flow will have a positive impact on the liquidity and trading activities of the cryptocurrency market.