Bitcoin is up 6% since the Fed rate cut. What’s next?

Despite short-term boost, Bybit executive warns investors of “potential challenges posed by economic uncertainty and market fluctuations”

article-image

Who is Danny/Shutterstock modified by Blockworks

share

Bitcoin has risen roughly 6% since the Federal Reserve revealed its first interest rate reduction in more than four years.

Industry watchers say that while the rate cut has so far proved to be a short-term catalyst for crypto, the longer-term economic outlook remains uncertain.

Bitcoin stood at roughly $63,600 at 2 pm ET Thursday — up from $60,000 24 hours prior.

Read more: Powell pitches 50 bps rate cut to support ‘strength of the economy and the labor market’

Lower interest rates generally drive more investment into riskier assets like crypto, due in part to the diminished returns from traditional investment vehicles, noted Bybit institutional head Chris Aruliah.

“However, the broader global economic slowdown stipulated by softer economic indicators and geopolitical complexities is tempering investor sentiment,” he said in a statement. 

While the rate cut offered a “short-term boost” to crypto markets, Aruliah added, “it is crucial to remain vigilant regarding the potential challenges posed by economic uncertainty and market fluctuations.”

Ruslan Lienkha, chief of markets at YouHodler, offered a similar warning.

The cut is favorable for equity markets and offers a “risk-on signal” for traders in the short term, he explained. It could even push BTC closer to its all-time high (above $73,000, reached in March).

But the move, as some indicated prior, could be seen as an “emergency measure” that suggests the Fed “misjudged the optimal timing for easing,” Lienkha added. 

“Over the next three months, it will become clearer whether the Fed can guide the economy toward a soft landing and avoid a recession in this cycle.”

Wednesday’s cut was likely just the first of several expected rate reductions in the coming months.  

Fed Chair Jerome Powell said at yesterday’s press conference that the Fed is “not on any pre-set course,” adding that rate decisions would be made meeting by meeting based on evolving economic data.

The US central bank “has a lot going for it” in terms of averting a deep recession, said FalconX research head David Lawant. 

“This cooldown commences from a comparatively elevated interest rate baseline, household balance sheets appear relatively robust, and inflation generally seems to be trending in the right direction,” Lawant added. “Nevertheless, unforeseen shocks should never be ruled out.”

Observers had debated whether the Fed’s cut would be sized at 25bps or 50bps. CME Group’s FedWatch tool had pegged the probability of the latter at 55% in the hours leading up to the decision. 

“The Fed has given the market what it was looking for with the bigger 50-basis point rate cut,” LMAX group market strategist Joel Kruger said in an email. “Our concern from here will be the market’s ability to continue to feel good about buying risk assets on future accommodative Fed gestures now that the accommodation has been priced to this extent.”

A modified version of this article first appeared in the daily On the Margin newsletter. Subscribe here so you don’t miss tomorrow’s edition.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Research Report Templates (6).png

Research

In recent months, a number of highly accretive developments were implemented across the protocol to improve fee capture, expand product functionality, and ultimately drive value accrual to the RUNE token, with more upgrades on the immediate horizon. These developments include hiking the minimum swap fee parameter to increase revenue, adding a Burn System Income Lever to reduce the RUNE supply, the addition of COSM-WASM smart contracting and IBC to enable an application layer, new chain integrations, and more.

article-image

Former IRS agent and Binance executive Tigran Gambaryan will remain imprisoned in Nigeria’s Kuje prison

article-image

When Permissionless III wraps on Friday, there will be 26 days left until the 2024 presidential election

article-image

Plus, an update from the ground in Salt Lake City at Permissionless III

article-image

The US regulator accused the crypto market-making firm of acting as an unregistered dealer

article-image

Customers can pay merchants in USDC or USDP on Ethereum, Solana, and Polygon, while US-based merchants are paid in dollars