Crypto Markets on Sidelines as Atlanta Fed Sees One Rate Cut This Year

Crypto markets were attentive when the Federal Reserve decided to keep rates unchanged at this March meeting. But he did indicate that three rate cuts were coming at this time. However, according to BloombergFederal Reserve Bank of Atlanta President Raphael Bostic says he now only sees plans to lower interest rates once this year, and that the rate cut will likely come later than he had anticipated.

Opinion on the Federal Reserve's three previous rate cuts

The change in forecast on the Federal Reserve's rate cut trajectory comes at a time when the market had already been hopeful about upcoming rate cuts. The market had valued around three rate cuts for 2024 from December 2023, and a first-level decline is expected at the March meeting. However, expectations for the same dropped considerably due to repeated indications from economic statistics and the Federal Reserve officials themselves. Similarly, the June rate cut that was originally anticipated has now been further delayed until September or later. This could put some pressure on the crypto markets.

Jerome Powell, chairman of the Federal Reserve, had said in the past that he does not believe a recession is imminent in the US economy. However, he noted that there is uncertainty around future inflationary developments, making it difficult to predict when the central bank will cut interest rates and promote current growth.

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Why is this important for crypto markets?

Historically, investors have relied heavily on the Federal Reserve's interest rate options when evaluating assets. Lower interest rates frequently cause government securities to lose value, increasing the appeal of bitcoin and other crypto assets. Investors may decide to hold onto traditional assets for the time being as a result of the Fed's delay in cutting rates, which has caused cryptocurrency markets to anticipate volatility. However, the positive is that a robust economy also keeps investor demand high. In prosperous economies, purchasing power is usually stable and riskier investments are favored. The Federal Reserve's decision is unlikely to stop the current growth rate of cryptocurrency markets in such a situation.