Crypto Markets Rally Following Fed Rate Cut, Anticipating Further Gains

Crypto markets experienced a slight rebound following the US Federal Reserve’s anticipated rate cut on Wednesday, with analysts suggesting a larger recovery may be on the horizon.

The central bank has made three consecutive interest rate cuts totaling 0.75% from September to December.

While this is fundamentally bullish for crypto in the long run, each cut has prompted short-term sell-offs, consistent with a “buy the rumor, sell the news” trend, according to onchain analytics firm Santiment on Thursday.

However, it noted, “there is typically a bounce after the dust settles,” which can create reliable trading opportunities.

“So far, this latest rate cut has followed the same pattern. Watch for signs of FUD or retail sell-offs to determine when the mild post-cut decline has concluded.”

Lower interest rates and reduced borrowing costs generally enhance risk appetite and lead to an influx of capital into speculative assets like crypto.

Fed rate cut widely anticipated

Jeff Ko, chief analyst at CoinEx, informed Cointelegraph that the Fed’s latest rate cut was “widely anticipated and largely priced in,” but its updated dot plot indicating future rate expectations “leaned slightly hawkish.”

Related: Conflicted Fed cuts rates but Bitcoin’s ‘fragile range’ pins BTC under $100K 

More crucially, Ko mentioned that the $40 billion short-term Treasury purchases were a “technical maneuver for financial system liquidity to lower short-term rates, rather than a large-scale, stimulus-driven initiative.”

“Yet, the markets interpreted this as mildly bullish, leading US stocks to rise and Bitcoin to bounce back along with broader risk sentiment.”

Bitcoin markets are evolving

Jurrien Timmer, Fidelity Investments’ director of global macro, looked at the long-term perspective, noting on Thursday that Bitcoin (BTC) has lagged behind stock markets this year. Nonetheless, he remarked that the markets are maturing compared to previous cycles.

“It’s challenging to discern in real time whether a new [crypto] winter is beginning, but by analyzing the evolving wave structure of Bitcoin’s maturing network curve, we can observe that the latest bull market appears quite mature.”