Binance exchange has just released a report predicting the impact of the FED interest rate decision on the cryptocurrency market, as the Federal Open Market Committee (FOMC) prepares to meet on September 17-18, 2024.
The market reportedly expects the Fed to begin a rate-cutting cycle following Chairman Jerome Powell's remarks at the Jackson Hole conference, signaling a shift in monetary policy.
Binance believes that rate cuts could have a strong impact on cryptocurrency prices, as the market is highly sensitive to macroeconomic fluctuations.
Lower interest rates will increase liquidity, increasing demand for risk assets like Bitcoin, which have responded positively to interest rate cuts in the past. For example, from February 2020 to February 2022, Bitcoin's price increased by 375% when the Fed cut interest rates to near zero.
Additionally, Binance predicts that low interest rates could lead to inflation, prompting investors to seek out cryptocurrencies as a hedge.
However, some experts worry that the benefits of the cut have already been priced into current prices. A small cut of 25 basis points could gradually boost markets, while a larger cut could stoke fears of a deeper recession, hurting risk assets.
