On March 20, 2024, the Federal Open Market Committee (FOMC) of the US Federal Reserve System (Fed) for the fifth time saved base rate in the range of 5.25-5.5%. Representatives of the regulator noted that inflation in the country remains at a high level, but pointed to positive dynamics.
We'll tell you how the crypto market reacted to the Fed's decision on the key rate, when the regulator might start lowering it, and why members of the crypto community are closely monitoring the metric.
Hints of Fed rate cut
The Fed began raising rates in March 2022 amid the escalation of the conflict between the Russian Federation and Ukraine. In July 2023, the rate reached a peak value of 5.25-5.5%. The Fed has held it ever since.
How the key interest rate in the United States has changed. Source: tradingeconomics
The key rate is the percentage at which commercial banks borrow from the Central Bank. Its growth encourages people to save, as changes lead to an increase in interest rates on loans and deposits. Against the backdrop of a rise in the key rate, high-risk assets such as cryptocurrency are losing their investment attractiveness. A rate cut, on the contrary, may increase investor interest in crypto.
The regulator's transition to lowering the rate may happen in 2024. Fed Chairman Jerome Powell hinted at the likelihood of such a decision.
The next meeting of the regulator will take place on May 1. As of the time of writing this review, about 90% of market participants believethat in the last month of spring the Fed will keep the rate at the same level. CFRA Research Chief Investment Strategist Sam Stovall surethat the first reduction will take place only in June. Total in 2024 the market may pass through three Fed rate cuts.
Let us remind you that the Fed’s inflation target is 2%. In February metric was at 3.2%. According to Powell, the key factor in a possible decision to cut the rate should be the regulator's confidence that inflation is moving towards the target.
Crypto market reaction
The crypto market reacted to the Fed’s decision with a slight increase. Bitcoin immediately tested levels above $68 thousand, after which it entered a correction. As of the time of writing the review, the coin is trading at $66,207. Bitcoin's 24-hour minimum, according to CoinMarketCap — $61,505, maximum — $68,199.
Many participants in the crypto community believe that BTC is preparing to update its absolute maximum (ATH), which was recorded on March 14, 2024 at $73,750. This point of view, including adheres to Trader Doctor Profit. In his opinionin the near future, investors will see a return of BTC to levels above $70 thousand. Some representatives of the crypto industry allow a deeper correction of Bitcoin before moving into growth.
Source: Cryptocurrency
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