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By Shree Venkatesh CPA
Effect of Fed rate cuts on the crypto sector is pretty interesting.
When rates are high there is a trend to settle for Bond returns whereas in low interest rate environment investors are ready to invest in volatile & riskier investments like crypto.
There is a strong technical correlation between the fed rates and the performance of the crypto market
We see a notable crypto surge of over $300M post fed rate cuts. Bitcoin contributes to about # 284M worth of inflows
Ethereum did not perform as well last week. Dwindling support from ETF and withdrawals from Grayscale trust forces an outflow of around $29 million. However, price of Ethereum has swelled over 2% in the last 24 hours
However, it is interesting that the fed solely is not responsible in influencing the crypto market
The SEC approval of Spot crypto ETF on Bitcoins and Ethereum have invited hefty investments from the distinguished investors.
The crypto market has seen the insurgence of around 500billion Dollars since the beginning of 2024. It stands at 2.2 trillion dollars right now.
Hence, it is not only the monetary policy but also investment behavior that dictates in the inflows in the digital asset space
Inflation concerns as well as the US Presidential election related dynamics can determine the year-end performance of Bitcoins
Inspite of the current Bullish trends’ investors need to be gimlet-eyed going by the history of the volatile asset’s drawdowns.
As per the co-founder of orbit markets, “Macro factors are driving crypto prices currently, and this should continue throughout the Fed’s easing cycle, unless we see a crypto-specific black swan event.”
The bitcoin price has aligned itself with the 200-day moving average
It looks like the crypto market is in the verge of a highly bullish trend post the 50 basis point Rate cut by the Feds on Sep 18 2024.
Author Bio
I am a CA ( Final ) and CS from India and a CPA from USA. I am a published author who loves to dab with numbers at the same time. I find the crypto world to be very interesting hence I punch my passion for writing with my love with the financial and accounting world.
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