Fed Rate Comment ‘Positive’ for Crypto Stocks

The US Federal Reserve’s decision to pause and possibly lower interest rates in 2024 is likely to be a “positive boost” for cryptocurrencies and crypto stocks.

in interview In a Dec. 13 interview with Bloomberg, BlackRock fund manager Jeffrey Rosenberg described the Fed’s hold on interest rates and hinting at rate cuts next year as a “green light” for investors, and the S&P 500 rose 1.37% following the decision.

“This bullish sentiment may continue for a while, at least until we get a new round of economic data, and until then, the message is clear: the Fed is more than willing to ease financial conditions.”

Cryptocurrency stocks also saw significant gains following the announcement; Shares of Coinbase and MicroStrategy rose 7.8% and 5%, respectively, and shares of Bitcoin mining company (BitcoinMarathon Digital shares rose 12.6%.

The perfect storm ⛈️: #Bitcoin half;#Bitcoin Spot ETFs;
Fed stops raising interest rates while signaling 3 cuts in 2024;
Good court results in @ripple / @greyscale cases;
Binance Settlement;
Election year = interest rate cuts, coupled with ️ go brrrrr and increased liquidity.

= https://t.co/1grOT1fBig

– John E. Deaton (@JohnEDeaton1) December 13, 2023

The Perfect Storm ⛈️: Bitcoin Halving; Bitcoin ETF;
Fed stops raising interest rates and indicates there will be 3 cuts in 2024;
Good judicial results in the @Ripple / @Grayscale cases;
Binance Agreement;
Election year = interest rate cuts, coupled with ️ go brrrrr and increased liquidity.

Henrik Andersson, chief investment officer at investment fund Apollo Crypto, told Cointelegraph that he expects the Fed’s pause and expected interest rate cuts in 2024 to be a “positive boost” for cryptocurrencies and related stocks, and added:

“If we see companies like BlackRock and Fidelity launching bitcoin ETFs, we can expect many other traditional financial institutions to enter the cryptocurrency markets as well.”

Blockchain stocks recently saw their largest weekly inflows ever; There was a staggering $126 million inflow into cryptocurrency-related stocks, according to Report dated December 11 from CoinShares.

James Butterville, head of CoinShares Research, also found that digital asset investment products saw inflows for the 11th straight week, recording weekly gains of $43 million.

Tina Teng, market analyst at CMC Markets, told Cointelegraph that the Fed’s interest rate halt will definitely increase market enthusiasm for cryptocurrency products.

“This shift has increased broad risk sentiment and improved expectations about future liquidity conditions, which has boosted cryptocurrency stocks in the same way.”

Teng said investors can expect to see similar upward trends not seen since previous interest rate pause cycles, amplified by institutional interest in Bitcoin exchange-traded funds, which are currently scheduled for a decision in early January.

However, Anderson added that a side effect of lower interest rates could be a cooling of the asset tokenization narrative in the real world; Expected increases in decentralized finance (DeFi) returns are becoming more attractive to investors in a low-rate environment.

“Much of the attention so far has been on tokenizing treasures,” he added. “We now see an environment where we can achieve returns in excess of 10% in DeFi, while traditional returns are trending in the opposite direction.”

Like many market commentators, Teng and Anderson consider the Bitcoin halving, which will occur around April 2024, to be a major catalyst for the overall growth of the cryptocurrency market.

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