🔍 What is the relationship between interest rates and cryptocurrencies?
Interest rates determine the cost of borrowing and the return on savings. When interest rates change, they directly affect market liquidity and investor behavior towards risky assets like cryptocurrencies.
🧭 Scenario One: Interest Rate Increase
🟥 Potential Negative Impact on Cryptocurrencies:
🔻 Decreased Liquidity: Borrowing becomes more expensive, reducing the flow of money towards high-risk assets.
📉 Weak Demand for Crypto: Investors prefer safer traditional instruments like bonds.
💵 Strength of the Dollar: Rising interest rates support the dollar, making cryptocurrencies relatively less attractive.
📌 Historical Example: During 2022, consecutive interest rate hikes caused a sharp decline in Bitcoin prices.
🟨 Scenario Two: Interest Rate Stabilization
🟡 Limited Impact Depends on Expectations:
🔄 The market may enter a state of anticipation and stagnation.
👀 Investors focus on the language of the statement and the Federal Reserve's future expectations.
📊 If there are indications of a future intention to lower interest rates, an early buying wave may begin in the cryptocurrency market.
📌 Advice: Monitor Jerome Powell's statements after the decision, as they often move the market more than the decision itself.
🟩 Scenario Three: Interest Rate Reduction
🟢 Potential Positive Impact:
💸 Increased Liquidity: Money becomes cheaper and easier to trade, encouraging investor entry into the markets.
📈 Rise in Cryptocurrency Prices: Expectations of interest rate cuts often drive Bitcoin and Ethereum upwards.
🔁 Return of "Risk Appetite" to the market, favoring digital assets.
📌 Note: The market may start to rise even before the actual cut, just upon confirmation of the trend.
