According to ChainCatcher, Binance CEO Richard Teng commented on the expectation of interest rate cuts, saying, “We expect that the expectation of interest rate cuts will have a considerable impact on the prices of crypto assets. Lower interest rates increase the liquidity of the financial system, thereby boosting demand for high-yield, high-risk assets, including cryptocurrencies. For example, between February 2020 and February 2022, when interest rates were close to zero, the price of Bitcoin rose by 375%.
Lower interest rates could stoke concerns about inflation, prompting some investors to turn to cryptocurrencies to protect their purchasing power; low interest rates could also weaken the dollar, making more investors likely to view crypto assets as an alternative store of value. Bitcoin and other crypto assets have unique features that could affect their prospects during a rate cut. One of the key factors to consider is the recent Bitcoin halving, which has historically been followed by price increases 6-18 months after similar events. The launch of spot ETFs could also facilitate easier conversions between stocks and cryptocurrencies, allowing the liquidity growth brought about by rate cuts to flow into the cryptocurrency market.
Additionally, while September is typically a weak month for crypto assets, prices typically recover from October, and expectations of rate cuts could provide additional momentum as prices rebound. The impact of the Fed’s rate cuts on crypto asset markets is uncertain, but multiple indicators suggest that the September policy changes could come at an opportune time for crypto investors. Lower borrowing costs and increased liquidity offer a promising outlook for crypto assets. Historical trends and unique cryptocurrency-specific variables further bolster optimism that these policy changes could spur growth.”
