Historical Context
2020 Rate Cuts: When the Fed aggressively cut rates to near zero during the start of the COVID-19 pandemic, the massive influx of liquidity and risk appetite coincided with a massive bull run in Bitcoin and the broader crypto market.
2022 Rate Hikes: Conversely, when the Fed aggressively raised rates starting in 2022 to combat inflation, it drained liquidity and lowered risk appetite, which was a major contributing factor to the sharp decline in crypto prices that year.
⚠️ Important Caveats
While rate cuts are generally seen as positive, the final impact depends on the context of the cut:
Reason for the Cut: If the Fed cuts rates because the economy is weak or heading toward a recession, this underlying economic fear could counteract the positive effects of cheaper money and lead to a temporary sell-off in all risky assets, including crypto.
Market Expectations: If a rate cut is already widely expected and "priced in" by the market, the actual announcement might lead to a muted reaction or even a sell-off ("buy the rumor, sell the news").
Other Factors: The crypto market is also heavily influenced by its own internal dynamics (e.g., Bitcoin Halving cycles, new regulations, technological developments), which can override or amplify the effect of the Fed's decision.$BTC $BANANAS31
