Bitcoin surged past $62K following Fed’s recent rate cut. Traders predict more cuts, but concerns about sustainability remain.
Bitcoin Reaches New Highs After Federal Reserve Rate Cut
Bitcoin soared above $62,000 after the Federal Reserve announced a 50 basis point rate cut. This move has spurred expectations of further reductions, with the median benchmark rate projected to hit 4.4% by year-end. Despite the surge, market sentiments are divided on the longevity of this rally, with some traders questioning its sustainability.
Fed’s Rate Cut Sparks Mixed Reactions
The Federal Reserve’s decision to cut rates has created a stir in the crypto market. While some investors remain optimistic, others are wary of potential market fluctuations. Major cryptocurrencies, including Solana’s SOL, BNB, XRP, and Cardano’s ADA, experienced gains, with SOL leading at a 6% increase. Polymarket traders are betting on more rate cuts, reflecting a strong belief in continued monetary easing by the Fed.
Crypto Market Sees Positive Movement
Bitcoin’s rise has impacted the broader crypto market positively. The CoinDesk 20 (CD20), which measures the performance of the largest digital assets, increased by 3.4%. This upward trend was led by Solana’s SOL, which saw a 6% rise, followed by BNB Chain’s BNB, XRP, and Cardano’s ADA, each gaining up to 4.5%. Even memecoins like Dogecoin and Shiba Inu joined the rally, each increasing by 4%.
Short-Lived Rally Expected
Despite the rate cut, traders remain cautious. Chris Aruliah, Head of Institution at ByBit, highlighted concerns over a global economic slowdown. He noted that while the Fed’s rate cut might boost the cryptocurrency market temporarily, the broader economic situation could still pose challenges. Arthur Hayes of Maelstrom echoed this sentiment, arguing that the rate cuts might not be necessary. He believes that the cuts could trigger short-term gains but eventually expose deeper issues in the financial system, potentially leading to lower prices.
Economic Growth and Inflation Concerns
In an interview with CoinDesk TV, Hayes stated that raising rates might not be necessary, given the consistent growth of the U.S. economy. He argued that the U.S. government’s significant spending is accelerating economic growth. However, he warned that continuous rate cuts amid high inflation could be a mistake. This could lead to more economic problems and worsen market conditions.
Market Sentiment Remains Divided
Presto Research reported mixed market reactions following the Fed’s rate cut. Concerns over economic growth and potential recession have left investors divided. The report emphasized that while the market needs positive news to rally, current growth concerns weigh heavily on investor sentiment.
Polymarket Bets on More Rate Cuts
Polymarket traders are confident that the Fed is not done cutting rates. They are betting on another 50 basis point cut by the end of the year, with a 41% probability. There’s also a 38% chance of a 125 basis point cut. Traders see a 65% likelihood of a 25 basis point cut in November and a 50% chance of a further cut in December.
Crypto Tokens on the Rise
In other news, Aleo, a token of the Hashkey-backed zero-knowledge proof blockchain, saw a 14% rise after being listed on Coinbase. Sui’s SUI and Fantom’s FTM also posted double-digit gains, showing a general recovery in AI-related tokens. Interestingly, the correlation between AI tokens and Nvidia has weakened, with Nvidia’s stock declining 3% over the past five days.
More Cuts Likely, Uncertainty Prevails
With the Fed expected to make further cuts, market dynamics remain uncertain. While some see this as an opportunity for short-term gains, others are concerned about the potential long-term implications. As the year progresses, all eyes will be on the Fed’s decisions and their impact on the crypto market.
Disclaimer:
The information provided on 13Desk is for informational purposes only and should not be considered financial advice. We strongly recommend conducting your own research and consulting with a qualified financial advisor before making any investment decisions. Investing in cryptocurrencies carries risks, and you should only invest what you can afford to lose. 13Desk is not responsible for any financial losses incurred from your investment activities.
