Is FED Interest Rates Cut in 2024 a Positive Sign for Crypto?

Vignesh Karunanidhi
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The U.S. Federal Reserve’s recent decision to pause interest rate hikes—and potentially lower rates in 2024—could provide a boost to crypto prices and related stocks, market observers say.

In an interview this week, BlackRock fund manager Jeffrey Rosenberg described the Fed’s policy pivot as a “green light” for investors. Major stock indexes rallied on the news, with the S&P 500 notching a 1.37% gain.

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Cryptocurrencies can benefit from the dovish stance

Analysts say the crypto sector stands to benefit from the more dovish stance as well. Shares of top crypto exchange Coinbase jumped nearly 7.7% following the Fed’s announcement that it may cut interest rates next year.

“This bullish sentiment can go on for a while, at least until we get a new round of economic data,” said Rosenberg. “The message is clear: the Fed is more than willing to see an easing in financial conditions.”

Observers say the backing off of rate hikes and expectations for future cuts could accelerate the adoption of cryptocurrencies by both institutional and retail players.

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“I expect today’s pause and the expectation of lowered interest rates in the coming year to be a positive boost for cryptocurrencies and crypto-related stocks,” said Henrik Andersson, chief investment officer at Apollo Crypto.

Signs of growing institutional interest are already emerging. Last week saw record weekly inflows into crypto investment products, per data from CoinShares. Blockchain equities attracted $126 million in new investments.

Meanwhile, crypto funds marked their eleventh straight week of inflows, taking in another $43 million.

Can cryptocurrency enthusiasm fade?

While lower rates may stoke crypto price gains in the near term, Andersson believes the shift could cool enthusiasm for asset tokenization to some degree. With yields rising in decentralized finance (DeFi), investors may find higher returns there compared to real-world asset deals in a low-rate climate, he said.

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Still, the upcoming Bitcoin halving in 2024 is seen as the most forceful catalyst on the horizon for the broader crypto complex. The programmed supply cut has preceded parabolic bull runs in past market cycles.