The expected decrease in the US Federal Reserve's interest rate on December 18, 2024, is likely to have a significant impact on the cryptocurrency market. A reduction of 25 basis points, which will lower the federal interest rate to a range of 4.25%–4.50%, could lead to the following potential consequences:
1. Increased risk appetite: With lower interest rates, investors often seek higher yields, and cryptocurrencies may become an attractive alternative to traditional investments such as bonds or savings accounts. This shift could increase demand for digital assets, leading to a rise in their prices.
2. Market volatility: The announcement itself may trigger short-term price fluctuations in cryptocurrencies as investors quickly adjust their portfolios in response to changes in monetary policy.
3. Impact on stablecoin issuers: Stablecoin issuers, who often back their assets with US government bonds, may face lower yields on their assets due to the rate decrease, which could potentially affect the stability and operations of these coins.
