What Crypto Fans Need to Know as Bitcoin Rises After Fed's Rate Cut

The Federal Reserve cut its benchmark interest rate by half a percentage point to a range of 4.75% to 5%, signaling the start of an easing cycle aimed at pre-empting economic and labor market weakening. This is the first rate cut in over four years and the first significant reduction since the pandemic. Fed Chair Jay Powell emphasized the move aims to maintain economic strength and manage inflation. The decision saw immediate market reactions, with US stocks initially rallying before closing slightly down, and the Treasury yield curve steepening. Asian markets also rallied following the announcement. The Fed's latest projections indicate further rate cuts are expected, potentially bringing the policy rate down to 4.25% to 4.5% by the end of 2024.

Marc P. Bernegger, co-founder of AltAlpha Digital, believes that the anticipated reduction in the federal funds rate could drive higher cryptocurrency prices by increasing liquidity and attracting investors to riskier assets. He expects the Federal Open Market Committee's announcement of lower rates to act as a bullish catalyst for digital currencies, potentially igniting a year-end rally. Bernegger suggests that the rate cut could set the stage for a crypto bull market fueled by increased liquidity, lower borrowing costs, and favorable market sentiment.

The Federal Reserve's decision to cut interest rates by 50 basis points highlights deeper economic struggles than previously acknowledged by policymakers. This shift from aggressive tightening to damage control reflects concerns over potential recession, stagnating job growth, and financial system weaknesses. While such monetary easing typically benefits Bitcoin by weakening the dollar, the scale of this cut suggests severe economic uncertainties, potentially leading to increased market volatility, including in cryptocurrencies.

The Federal Reserve's 50 basis points rate cut sends mixed signals for Bitcoin. Traditionally positive for hard assets due to inflationary effects, this cut feels more like an emergency response to economic instability. If perceived as a sign of deeper economic trouble, Bitcoin could face a risk-off selloff. Recently, Bitcoin has struggled to maintain its summer gains, dropping from highs of $65,000 in August to below $59,000. With the latest rate cut, Bitcoin may experience increased turbulence as investors reassess economic conditions.

Despite potential short-term volatility from the Fed's aggressive rate cut, Bitcoin's long-term outlook remains strong. As central banks worldwide respond to economic weakness with monetary expansion, Bitcoin's value as an independent global financial network is reinforced. While the immediate market reaction to the 50 basis points cut may introduce turbulence, Bitcoin's appeal as a refuge from fiat debasement grows stronger. Investors may face near-term volatility, but Bitcoin's fundamentals continue to validate its role as decentralized, sound money in a mismanaged fiat economy.

The Token 2049, a major cryptocurrency event, took place in Singapore from September 18 to 19, marking a vibrant week for the cryptocurrency sector. Global investors and industry players focused on digital currency payments and price volatility, while also looking forward to further mainstream adoption of the crypto industry.Currently, the trend in the industry is towards investing in digital currency assets and expanding digital currency payments to more scenarios, with several Singaporean companies announcing progress in these areas this week.

• On Wednesday, Singaporean cryptocurrency payment company Dtcpay announced that its digital payment function will be integrated into Visa's global payment network. Dtcpay and Visa will collaborate to launch a credit card that allows users to convert digital currency to fiat currency in real-time and make payments.

• DBS Bank announced on Tuesday (17th) that it will launch over-the-counter (OTC) digital currency options trading and structured products starting in the fourth quarter, becoming the first Asian bank to offer financial products linked to the prices of Bitcoin and Ethereum.

• Last week, Singapore's private-hire vehicle platform TADA launched a mini-program called Tada mini, allowing users to book rides via Telegram and pay using digital currency.

• Several speakers at the Token 2049 summit expressed that, in addition to increased payment scenarios and a growing number of investors, they hope to see cryptocurrencies become more mainstream and even give rise to super apps that integrate gaming and social features.