Fed to Slash Interest Rates: What a 50bps Cut Means for Bitcoin and Financial Markets

• The US Fed will slash interest rates by 50 bps to the range of 450-475 on September 18, 2024.
• This reduction of the interest rate would prompt investors to invest in high-risk instruments such as Bitcoin and cryptocurrencies.
• Expect further rate cuts till mid-2023 at a scale of 275-300 bps by May 23 by May 2025.

The Federal Reserve is expected to lower the federal funds rate by 50 basis points (bps) on September 18, 2024. This shift could influence financial markets significantly. The projected reduction of the rate from its current range of 500-525 bps to 450-475 bps reflects growing concerns about economic conditions and the need for looser monetary policy to support growth.

The possible rate cut is inline with other market predictions. Around 50% of the forecast asserts that the downgrade is due for a decline with data recording such probabilities for the FOMC meetings of the future weeks. 

The expected cut on the rates may positively impact investors and businesses through lowering on their interest expenses and effectively undo the damage that came from recession thought. This decision which as we have seen would help maintain economic stability would therefore have large effects on financial assets-including normal markets, bonds and commodities.

Rate-Cut Impact on Bitcoin and Other Crypto Markets

Typically, low-interest rates lead to higher investment in riskier assets such as bitcoin because yields on other conventional assets like bonds are usually low. This expectation could increase the demand for cryptocurrencies in the case they are viewed as an inflation hedge to fiat currencies in conditions of easy money.

This also suggests a path of future meet cuts as the September meeting also prescribes further rate cuts. When it comes to probabilities, there was a continuation of the decline and the likely rates unveiled 400-bps for November 7 and December 425-bps December .

The possibility of an additional three consecutive rate cuts through mid 2025 however indicates that the Federal Reserve has precisions on what it considers as the headwinds of the economy. In May 2005 rates can drop down to 275-300 bps, pointing at the prolonged period of the rates’ decline, if the current trends persist.