Fed Pause Is ‘Green Light’ For Investors – Here’s What It Means For Crypto
A decision from the US Federal Reserve to pause and possibly lower interest rates in 2024 could serve as a “positive boost” for cryptocurrencies and crypto stocks.
In a Dec. 13 interview with Bloomberg, BlackRock fund manager Jeffrey Rosenberg described the Fed's rate hike and hints of rate cuts next year as a “green light” for investors, and the S&P 500 rose 1.37% on the decision.
“This bearish sentiment may continue for some time, at least until we get a new round of economic data, and until then, the message is clear: the Fed is willing to see easing in financial conditions.”
Crypto stocks saw significant gains on the back of the announcement, with shares of Coinbase and MicroStrategy up 7.8% and 5%, respectively, while Bitcoin (BTC) miner Marathon Digital jumped 12.6%.
Perfect Storm ⛈️: #Bitcoin Halving; #Bitcoin Spot ETFs; Fed Stops Rate Increases With 3 Cuts in 2024; Favorable Court Results on @Ripple / @Grayscale Liquidity Increase.
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— John E. Deaton (@JohnEDeaton1) December 13, 2023
Henrik Andersen, chief investment officer of investment fund Apollo Crypto, told Cointelegraph that he expects the Fed's easing of the Fed's rate hike and expected interest rate cuts in 2024 to be a “positive boost” for cryptocurrencies and crypto-related stocks.
“If we see the likes of BlackRock and Fidelity launch bitcoin ETFs, we can expect many other traditional financial institutions to enter the crypto markets.”
Blockchain equities recently experienced their biggest weekly inflows, with a staggering $126 million flowing into crypto-related stocks, according to a December 11 CoinShares report.
CoinShares head of research James Butterfill also found that digital asset investment products experienced the eleventh largest direct revenue stream, posting a weekly profit of $43 million.
Tina Teng, market analyst at CMC Markets, told Cointelegraph that the Fed's rate pause will undoubtedly increase market sentiment for crypto products.
“The pivot raised broader risk-off sentiment and improved expectations for future liquidity conditions, thereby buying crypto stocks in tandem.
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Teng said investors can expect to see similar bullish trends not seen since the previous rate-beating cycles, pending increased institutional interest in Bitcoin exchange-traded funds, which are currently in early January.
However, Andersen added, a side effect of low interest rates could be slowing the real-world asset token narrative, making the rise of decentralized finance (DeFi) products more attractive to investors in a low-cost environment.
“So far, the interest is in introducing treasuries. We have now seen an area where we are getting more than 10% production in Diffi, while traditional products are going in the opposite direction,” he said.
Like many market analysts, Teng and Anderson both see the upcoming Bitcoin halving in April 2024 as a big boost for the overall crypto market.
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