The Federal Reserve (Fed) has decided to keep interest rates stable after three consecutive cuts last year. This decision has direct implications for cryptocurrencies, investors, and the global economy. Here are 10 key points explaining how this move shakes up the markets:
1. Bitcoin as a financial refuge
When the Fed keeps rates high or uncertain, investors seek scarce and decentralized assets like Bitcoin. The lack of cuts may reinforce the narrative of BTC as 'digital gold.'
2. Less liquidity, less FOMO
High rates make loans more expensive and reduce liquidity in the markets. Less cheap money means fewer speculative investments in cryptocurrencies, affecting volatility.
3. Ethereum and the DeFi ecosystem under pressure
The DeFi sector benefits from low rates, as investors prefer to earn yields on decentralized platforms. With high rates, competition with traditional bonds becomes stronger.
4. Inflation remains high: Bullish for Bitcoin?
The Fed acknowledges that inflation remains 'high,' which has historically been bullish for Bitcoin, as investors seek protection against loss of purchasing power.
5. Accumulation or correction moment?
If the Fed maintains uncertainty, the crypto market could enter an accumulation phase until there is clarity on future moves.
6. Wall Street and cryptocurrencies: a strong correlation
Stock markets react directly to the Fed's policy. If the S&P 500 falls, cryptocurrencies usually follow it, at least in the short term.
7. Global impact on emerging currencies
Countries with weak currencies suffer when the Fed keeps rates high, as it strengthens the dollar. This may lead to greater adoption of cryptocurrencies in regions affected by devaluation.
8. What to expect for Bitcoin ETFs?
Bitcoin exchange-traded funds (ETFs) are on the rise, but a market with high rates may hinder new institutional investments until the Fed provides more signals.
9. The halving cycle vs. Fed policy
Bitcoin faces its next halving in 2024. If the Fed cuts rates later, it could coincide with an explosive bull cycle for BTC.
10. Powell remains silent on Trump: Political impact on the crypto space?
The Fed avoided commenting on Trump and his future policies. If a new government pushes for more favorable or hostile regulations, the crypto market could react strongly.
