The Federal Reserve cut rates by 25 basis points: how Bitcoin and cryptocurrency prices reacted and what the next steps are.
The Federal Reserve (Fed) announced its first interest rate cut of the year, and the cryptocurrency market reacted immediately. Shortly after the announcement, the price of Bitcoin (BTC) plummeted, falling below the $115,000 mark.
Experts predict that cryptocurrencies will rise.
Federal Reserve Chairman Jerome Powell noted that while inflation has significantly decreased from its mid-2022 peak, it remains high compared to the Fed's long-term target of 2%.
He also noted that under the circumstances he described as a lack of vitality in the labor market, the risks of job loss are increasing. Looking ahead, Powell indicated that the Federal Reserve expects interest rates to stabilize between 3.5% and 3.75% by the end of 2025, a decrease of 0.50% from current levels.
In addition, he mentioned that the Federal Open Market Committee (FOMC) plans to implement two more interest rate cuts within this year.
Market expert Lark Davis shared his views on the impact of interest rate cuts on the social media platform X (formerly Twitter). He stated that an interest rate cut means 'the printing press is starting,' and predicted that cheaper capital will soon flow into the cryptocurrency market.
Although Davis acknowledged the possibility of a short-term decline, as evidenced by Bitcoin's performance after the interest rate cut decision, he remains optimistic about the medium- to long-term rise of cryptocurrencies.
Will interest rate cuts drive Bitcoin and Ethereum to new heights again?
Analysts of the bull market theory supported this view in previous analyses, explaining how low interest rates enhance liquidity. They pointed out that lower borrowing costs would encourage businesses and consumers to increase spending, ultimately boosting economic activity.
They compared it to the situation after the Federal Reserve began cutting interest rates at the end of 2024, highlighting how Bitcoin hit an all-time high and how Ethereum (ETH) soared above $4,000. The previous rise lasted about two months, suggesting that the current environment may lead to similar results.
Despite the current volatility in the cryptocurrency market, analysts predict that in the short term, savvy investors and market giants may attempt to squeeze retail investors out of the market. However, they still believe that the trading prices of Bitcoin and other altcoins may rise significantly in the next three to six months.
Stay tuned for more updates. Dear traders, please leave your opinions in the comments section.