The Fed may cut interest rates again on Wednesday, will the encryption market benefit?

According to CNN, the industry generally expects the Fed to cut interest rates again at the meeting that ended on Wednesday, which may have an impact on the cryptocurrency market.

The report said that US President Trump continued to use Twitter to put pressure on the Fed. Last week he issued a tweet saying, "The Fed should lower interest rates to zero or lower, and then we start refinancing debt."

Although it was previously stated that the United States is unlikely to experience a recession, Fed Chairman Powell also admitted that the economic situation is deteriorating. He said earlier this month, "All of these risks exist and we are monitoring these risks very seriously. We are implementing policies in a way that addresses these risks."

His remarks fueled investors' expectations that the Fed will announce a rate cut after the September 17th and 18th meetings. Earlier in July this year, with the escalation of Sino-US trade war, the Fed cut interest rates for the first time in 10 years.

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The Fed’s interest rate cut is a good news for the encryption industry in general. Because interest rate cuts are inflationary, this means they will reduce the purchasing power of legal tender. Therefore, there is a general consensus in the encryption market that the Fed’s monetary easing policy is good for Bitcoin. Bitcoin is essentially deflationary and will cut supply by half in less than a year.

MT Greenspan, senior analyst at eToro, said that bitcoin prices will continue to rise as the Fed cuts interest rates. He believes that the interest rate cut will eventually encourage large business owners to borrow funds for investment companies, which in turn will affect more people and increase the speed and availability of funds. When more people have a lot of money in their hands, more money will be used for small investments, such as buying cryptocurrencies. More demand for Bitcoin will eventually increase the price of Bitcoin.

Nonetheless, the encrypted media coindesk believes that the price trend of Bitcoin is not directly related to the Fed’s rate hike or interest rate cut. Although the price of Bitcoin hit a high in the year in June this year is considered to be related to the Fed’s rate cuts, the price response of Bitcoin was not obvious when the Fed announced a 25 basis point cut in July.

In addition, between 2015 and 2017, the Fed raised interest rates several times, but the price of Bitcoin continued to rise and hit an all-time high of $20,000. Therefore, the possibility that Bitcoin will respond positively to interest rate cuts is questionable.

In addition, the traditional market expects the Fed to cut interest rates by 25 basis points. Only when the Fed cuts interest rates by 50 basis points or indicates that monetary easing will be implemented in the near future, the foreign exchange market will be able to sell dollars, and funds will likely enter the encryption market.

According to the data, the price of Bitcoin still fluctuates within a narrow range between 10,000 USD and 10,500 USD as of the time of publication. The subsequent breakthrough direction is still uncertain.

Image source: pixabay

By Liang CHE

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