Bitcoin surged more than 2% after the U.S. Federal Reserve cut interest rates, the first such cut by the Fed since 2020. The move impacted the cryptocurrency market and changed investor behavior.
Fed rate cuts and cryptocurrency investments drive Bitcoin price surge
A surprise move from the Federal Reserve
On September 18, 2024, the Federal Reserve cut its key interest rate by 0.5%. This major change in monetary policy came just before the November election.
Bitcoin’s quick response
Following the news, Bitcoin prices rose 2.63% to $62,120.22, which is in line with typical investor behavior: When interest rates fall, investors often want to take on riskier investments.
Karim Dandasi, trading at Flowdesk US, said: “The market was reflexively buoyed by some relief after weeks of 25-50 basis points of volatility.”
What does it mean for the future?
It remains to be seen how the Fed’s choice will impact Bitcoin and other cryptocurrencies in the long term. Spencer Haran of crypto investment firm GSR believes: “In theory, the Fed cutting rates by 50% could be a signal that they’re worried about something. If the Fed thinks we’re on the brink of a recession, they might feel a greater urgency in cutting rates.”
Is Bitcoin safe in tough times?
Some investors believe Bitcoin could protect them if the U.S. falls into financial trouble, with investment giant BlackRock saying many of its clients see it as a safety net.
Can Bitcoin earn interest?
Opinion is divided on whether BTC can earn interest like a savings account, with MicroStrategy’s Michael Saylor believing that banks could offer interest if they were careful.
But Saifedeen Amos “Bitcoin Standard” I don’t agree. He says, “Ultimately, I think this model doesn’t work without a lender of last resort. I think people are going to learn the hard way that you shouldn’t do this.”
The cryptocurrency market continues to change as major economic factors shift, and investors need to stay informed and consider different perspectives when deciding what to do with their funds.
