The Federal Reserve has just announced its first interest rate cut in a while, dropping the upper limit to 5% as of September 18, down from 5.50%. This decision came after an 11-1 vote by the Federal Open Market Committee (FOMC), with U.S. stock indices experiencing a short-term rise. The Dow Jones went up by 0.79%, the S&P 500 by 0.86%, and the Nasdaq by 0.98%.
Interestingly, the Federal Reserve's dot plot also suggests that more rate cuts might be on the horizon, with some officials calling for as much as 75 basis points worth of cuts by 2024.
But how does this affect the cryptocurrency market?
For many crypto investors, this rate cut has been highly anticipated. Thereâs a strong belief that lower interest rates create the perfect conditions for a cryptocurrency bull run. Historically, rate cuts have driven investors toward riskier assets like crypto, as low-interest environments tend to weaken the dollar and make traditional investments less attractive. Investors recall that similar moves by the Fed in the past triggered massive upward movements in Bitcoin and altcoins.
The announcement already stirred excitement in the market, as people feel this could be the spark needed to ignite a new bull cycle. Gold prices spiked nearly $20 after the rate cut, and the U.S. Dollar Index (DXY) dropped by 40 points, which also signals potential capital flow into cryptocurrencies. If history repeats itself, many believe the long-awaited bull run could be just around the corner.
With the Fedâs projected rate to drop further in 2024 and inflation risks seemingly balanced, crypto enthusiasts are eagerly watching for Bitcoin, Ethereum, and other major tokens to gain traction in the coming months. Many believe that with the right conditions, the cryptocurrency market could witness exponential growth, similar to previous rate-cut cycles that have led to considerable gains in the space.
Now that the first cut has happened, the stage could be set for a breakout in the crypto market.