Based on the current economic background and the Federal Reserve’s policy guidance, there are two main types of interest rate cuts that the Federal Reserve may adopt in 2024:
Precautionary interest rate cuts and countercyclical interest rate cuts.
Precautionary interest rate cuts:
Despite the strong economic performance, inflationary pressures and global economic uncertainty remain. If the Fed wants to take action before the economy slows down significantly, a precautionary rate cut is a possible option.
Countercyclical rate cuts:
If economic data deteriorates significantly in the next few months (such as slowing GDP growth, a weak job market, or a rapid decline in inflation), the Fed may adopt countercyclical interest rate cuts in response to an economic recession or significant slowdown.
The Fed's interest rate cut in 2024 may be mainly a precautionary rate cut or a countercyclical rate cut. These two types of interest rate cuts will have different short-term and long-term effects on Bitcoin prices.
Precautionary rate cut
This could boost Bitcoin prices in the short term by boosting market confidence and increasing liquidity, and support its use as a hedge against U.S. dollar depreciation in the longer term.
Countercyclical rate cuts
This may support the good price performance of Bitcoin in times of economic uncertainty through increased demand for safe havens and expectations of long-term easing policies.
Overall, cutting interest rates and releasing water will bring more liquidity to the US dollar, and more funds will enter the crypto market, which will lead to a sharp rise in the market.
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