Crypto Markets Surge After Fed Rate Cut, Anticipating Further Gains

Crypto markets experienced a modest rebound following the US Federal Reserve’s anticipated rate cut on Wednesday, with analysts predicting a more significant surge could follow.

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

While these cuts are fundamentally bullish for the long-term outlook of crypto, each one resulted in short-term sell-offs, adhering to the classic “buy the rumor, sell the news” phenomenon, as noted by the onchain analytics firm Santiment on Thursday.

Nonetheless, Santiment remarked that there is “often a bounce after the dust settles,” which could create predictable trading opportunities.

“So far, this latest rate cut mirrors previous patterns. Watch for signs of FUD or retail sell-offs to signify that the slight post-cut downturn has concluded.”

Lower interest rates and reduced borrowing costs generally stimulate a greater risk appetite and increase capital flow into speculative assets like crypto.

Fed rate cut widely anticipated

Jeff Ko, chief analyst at CoinEx, informed Cointelegraph that the latest rate cut from the Fed was “widely anticipated and almost factored into the market,” although the updated dot plot indicating the future rate direction “leaned slightly hawkish.”

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

Ko further emphasized that the $40 billion short-term Treasury purchases represent a “technical move for liquidity in the financial system aimed at lowering short-term rates, rather than a large-scale stimulus initiative.”

“However, the markets interpreted this as slightly bullish, resulting in a rise in US stocks while aiding Bitcoin’s recovery in line with the broader risk sentiment.”

Bitcoin markets evolving

The director of global macro at Fidelity Investments, Jurrien Timmer, reflected on the longer time frame on Thursday, noting that Bitcoin (BTC) has lagged behind stock markets this year. Despite this, he pointed out that markets are maturing compared to previous cycles.

“It’s challenging to ascertain in real time if a new [crypto] winter is approaching, but analyzing the evolving wave structure of Bitcoin’s developing network curve suggests that the most recent bull market appears quite mature.”