Will rate cuts restart the crypto bull run?

Author: Jack Inabinet Source: bankless Translation: Shan Ouba, Golden Finance

The Federal Reserve just announced a rate cut, the first since the pandemic, and as expected, a sharp 50 basis point cut. This long-awaited decision immediately sparked excitement among stock and cryptocurrency investors.

Powell's printing press has finally restarted, which is why many in the market are optimistic that this rate cut could trigger another cryptocurrency bull run.

In 2022, the Federal Reserve raised interest rates to combat high inflation, causing borrowing costs to rise and asset prices to fall, triggering a bear market. However, as interest rates fall, many expect that monetary easing could gently guide the global economy to a “soft landing”.

If inflation does not surge, and if rate cuts help keep unemployment stable, central bankers could have accomplished the unthinkable – removing significant economic uncertainty and achieving a level of global economic stability not seen in decades!

While the Fed’s latest economic projections appear to favor further rate cuts in the future, they also reflect the uncertainty of the situation, with inflation forecasts downgraded, GDP estimates flat, and unemployment expectations up sharply.

The biggest economic risk has shifted from rising inflation to falling employment, as evidenced by the rate cut decision. Although Fed members and other central bankers are confident that they can manage these risks through further rate cuts, any sustained economic downturn could quickly turn into serious recession concerns.

Global bond yields, which had been rising since Tuesday, fell only slightly after the rate cut news was confirmed, suggesting that the market had already factored it in and was in early decline since July. Although Bitcoin rose by about 2% on the news of the rate cut, the market soon began to sell off, erasing the gains before the close.

While the initial excitement about the rate cut was evident, the rapid reversal in the market shows that uncertainty remains. Investors are now closely watching how the economy responds to these changes, hoping for a smooth transition but wary of possible bumps ahead. As the balance between inflation, employment and growth continues to unfold, it remains to be seen whether this will actually spark the next crypto bull run or trigger deeper recession fears.