The impact of the Fed’s rate cut on the cryptocurrency market
The Federal Reserve’s decision to cut interest rates by 50 basis points immediately had a positive impact on the cryptocurrency market. The price of Bitcoin soared to nearly $62,000, up 2.4% in 24 hours.
The change reflects traders’ optimism about an injection of liquidity into the economy, which typically drives investment in riskier assets such as cryptocurrencies. The overall cryptocurrency market cap rose 1.7%, according to CoinGecko, in line with positive investor sentiment.
Market Analysts’ Views on Sustainability
Chris Allulia, head of institutional affairs at ByBit, highlighted the tentative nature of the rally, attributing it to the global economic slowdown and ongoing geopolitical tensions. "While the Fed's policy rate cuts have provided a short-term boost to the cryptocurrency market, caution is warranted due to economic uncertainty and market volatility," Allulia said.
Arthur Hayes, co-founder of BitMEX, criticized the rate cut as unnecessary and warned that such measures could cause deeper long-term problems in the global financial system. Hayes believes that "the U.S. economy is strong, as evidenced by the continued growth of GDP over the past eight or nine quarters. Continued rate cuts are likely to accelerate inflation in the fourth quarter."
Future interest rate cuts and market speculation
On platforms such as Polymarket, investors predict that the Fed will further cut interest rates. The probability of a further 100 basis point cut by the end of the year is 41%, while the probability of a 125 basis point cut is 38%. These forecasts highlight the expectation that monetary easing will continue, which is likely to further affect the price of cryptocurrencies. Market participants are closely watching the Fed's actions, realizing that prolonged easing policies may lead to increased inflationary pressures and have serious implications for market dynamics.
Binance trading volumes hint at short-term spike
Binance’s spot trading volume reached a staggering $85 million in one hour, the highest level in more than three months. According to data from Glassnode, a large increase in Binance’s spot trading volume is often accompanied by a pullback in Bitcoin’s price. A similar surge in trading volume occurred in August, followed by a decline. This pattern suggests that Bitcoin’s current surge may be short-lived.
Recent activity also shows that short-term Bitcoin holders (those who have held Bitcoin for less than 155 days) are taking profits. More than $750 million worth of Bitcoin was sent to exchanges for sale, the second-highest amount since August. This strategy of selling on rising prices supports the view of a short-term peak, with many traders choosing to cash out when prices are high.
