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Crypto Markets Bounce as Fed Signals Three Interest Rate Cuts in 2024

2 mins
Updated by Kyle Baird
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In Brief

  • Crypto markets recover following a dip, possibly driven by the US Federal Reserve's latest rates outlook.
  • The US Fed signals three rate cuts in 2024, pushing crypto and US stock markets higher.
  • Crypto market capitalization jumps 5% to $1.68 trillion; Bitcoin and Ethereum also see significant gains on the day.
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Crypto markets are already recovering from their dip earlier this week, with a move higher today. This uptick in momentum may have been driven by the latest rates outlook from the US Federal Reserve. 

The US central bank held its December Federal Open Market Committee meeting on December 13. In a broadly expected move, Fed officials left interest rates unchanged at 5.5%. 

Interest Rates Remain Unchanged 

However, with inflation falling, predictions for 2024 were more optimistic. There was a suggestion of three rate cuts in 2024, which pushed crypto and US stock markets higher. 

Macroeconomics outlet The Kobeissi Letter commented that this was the first significant mention of rate cuts in 2024 by the Fed, adding

“However, markets are currently pricing in up to 6 rate cuts in 2024. Market expectations remain far more dovish than the Fed itself.”

Read more: How To Prepare for a Bitcoin ETF: A Step-by-Step Approach

Interest rate projections by FOMC officials through 2026. Source: Reuters
Interest rate projections by FOMC officials through 2026. Source: Reuters

Speaking to reporters after the meeting, Fed Chair Jerome Powell said,

“Inflation has eased from its highs, and this has come without a significant increase in unemployment. That’s very good news.”

He added, “We are likely at or near the peak rate for this cycle.”

Global head of market strategy at TradeStation, David Russell, noted that there was “a big change in the language that indicates policymakers see less need to aggressively tighten.”

Inflation maxed out at 9.1% in June of 2022. However, year-over-year inflation fell to just 3.1% in November. Fed officials have now predicted that it will drop to 2.4% next year and 2.1% in 2025.

Moreover, central bank officials are projecting GDP growth of 1.4% and an unemployment rate of just 4.1% next year. 

Investors are now primed for the “Santa Claus Rally,” commented Gina Bolvin, President of Bolvin Wealth Management Group. 

Crypto Markets Bounce  

American bourses were not the only things to move on the Fed’s dovish pivot. Crypto market capitalization has jumped 5% on the day to reach $1.68 trillion at the time of writing.

Moreover, markets have pretty much recovered from this week’s leverage flushout

Bitcoin was trading at just under $43,000 at the time of writing, following a 4.9% gain on the day. 

BTC/USD 1 week. Source: BeInCrypto
BTC/USD 1 week. Source: BeInCrypto

The asset now looks primed to return to its 2023 highs of $44,000 should the momentum continue. 

Meanwhile, Ethereum had gained 5.1% on the day to reach $2,272 at the time of writing. 

Altcoins were performing well, with double-digit gains for Solana, Cardano, Avalanche, and Polkadot. 

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Martin Young
Martin Young is a seasoned cryptocurrency journalist and editor with over 7 years of experience covering the latest news and trends in the digital asset space. He is passionate about making complex blockchain, fintech, and macroeconomics concepts understandable for mainstream audiences.   Martin has been featured in top finance, technology, and crypto publications including BeInCrypto, CoinTelegraph, NewsBTC, FX Empire, and Asia Times. His articles provide an in-depth analysis of...
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