- Bitcoin price dropped sharply following the Federal Reserve’s second consecutive interest rate cut.
- Fed Chair Jerome Powell issued cautious comments, reducing the likelihood of another rate cut this year.
- The Federal Reserve plans to end its $6.6 trillion balance sheet reduction program in December.
- Experts say the halt of quantitative tightening could signal a return to stimulus measures, potentially benefiting crypto markets.
- Analysts expect increased liquidity and lower interest rates to support higher bitcoin prices in the coming months.
The price of bitcoin fell sharply after the United States Federal Reserve made its second consecutive interest rate cut recently. This move was followed by hawkish remarks from Fed Chair Jerome Powell. The Fed also announced plans to stop reducing its balance sheet in December. These developments took place amid ongoing market anticipation of significant policy changes by the Fed.
Bitcoin’s value dropped to around $108,000 before rising slightly above $111,000. Jerome Powell confirmed the Fed would end its $6.6 trillion balance sheet reduction program on December 1. He stated this plan aims to maintain ample reserve conditions in money markets. The Fed cut interest rates by 25 basis points, signaling looser monetary policy but warned that a further cut this year is not guaranteed. According to CME’s FedWatch, the market’s expectation of another rate cut in December dropped from 90% to 70%.
Alex Blume, chief executive of investment firm Two Prime, said, “[The] rate cut continues the path of loosening monetary conditions in the U.S. and abroad.” He added that the government is aiming to grow its economy to manage debt and inflation rather than relying on austerity. Nicholas Roberts-Huntley, chief executive of Blueprint Finance, explained that lower interest rates reduce the cost of holding digital assets, and a weaker dollar makes them more attractive. He noted this environment could help crypto markets, saying, “While the full effects won’t be felt overnight, crypto is entering a more supportive macro environment, and that tailwind could help propel a sustained uptick in the coming months.”
Paul Ashworth, chief North America economist at Capital Economics, told Reuters that the Fed would begin expanding its balance sheet by roughly $20 billion per month. This approach is expected to help the financial system’s monetary base grow in line with the gross domestic product. The end of the Fed’s two-year quantitative tightening program is seen by some as a shift back toward quantitative easing, which involves increasing money supply to stimulate the economy.
For further details, see the original Forbes article.
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