The Federal Reserve decided to keep interest rates steady for the third time in a row. But what moved the financial markets and the cryptocurrency market was the hint of monetary policymakers in the United States of America to the end of the cycle of monetary tightening and reducing borrowing costs in 2024.
This led to a decline in the price of the dollar and US Treasury bond yields and a rise in the price of Bitcoin and global stock indices.
This decision is very important for the price of Bitcoin (BTC) and cryptocurrency markets in general.
Some analysts even see the implications of this decision as greater than the issue of spot Bitcoin ETFs. Which has been the primary driver of the cryptocurrency market in the past three months.
According to the latest report on market developments from QCP, a company specializing in providing digital asset services. The rise in the price of Bitcoin (BTC) is mostly due to macroeconomic factors in the United States of America.
Like estimates of supplies of US Treasury bonds and expectations that the Federal Reserve will conclude its campaign to tighten monetary policy and raise interest rates.
And not only, due to expectations about the possible approval of spot Bitcoin ETFs.
The Fed has raised interest rates by 525 basis points over the past 14 months. Until May 2023, to combat inflation, which has risen to high levels.
The rapid tightening of liquidity by the reserve has contributed to discouraging investment in high-risk assets. It was partly responsible for the collapse of the price of Bitcoin and the cryptocurrency market last year.
Green light from the Fed for Bitcoin
In a weekly market analysis on the Bitfinex platform blog, analysts said: “Historically, lowering or stabilizing interest rates usually raises hope among investors, as this indicates more disposable income and the possibility of increased investment in different asset classes.”
This effect is not limited to traditional markets only but also extends to new assets such as the cryptocurrency market.
Weekly market analysis on the Bitfinex platform blog.
In a December 13 interview with Bloomberg, Blackrock fund manager Jeffrey Rosenberg described the Fed’s pause in raising interest rates — and its indication of a possible rate cut next year — as a “green light” for investors. The S&P 500 index rose by 1.37% following this decision. “
He said this optimism could continue for a while, at least until we get a new round of economic data. Until then, the message is clear: the Fed is more than willing to ease fiscal borrowing conditions.”
