How the Fed’s Decision Affects Cryptocurrency Prices

The Federal Reserve decided to keep interest rates steady on Wednesday. With a rate cut expected in September, this will be the first rate reduction since March 2020.

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Investors are anticipating a 0.25% cut, with a small chance of a 0.50% cut. Fed Chair Jerome Powell mentioned that a larger cut isn't currently being considered and that future decisions will depend on economic data. Despite the positive stock market reaction, Bitcoin and Ethereum saw their prices fall in late trading on Wednesday.

Travis Kling, founder of Ikigai Asset Management, believes that lower interest rates could boost cryptocurrency prices. He thinks that a decrease in rates creates a supportive environment for digital assets like Bitcoin. “With many central banks moving towards easing, it’s a great time to invest in Bitcoin,” Kling said. He is optimistic that lower rates will benefit the crypto market throughout the year.

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In general, lower interest rates have led to increases in riskier assets, including cryptocurrencies. This year is unique due to new Bitcoin and Ethereum ETFs and a recent Bitcoin halving.

Kling is hopeful that lower rates will help both the economy and crypto prices. He also noted that recent data shows growing interest in Ethereum. While there has been a slowdown in outflows from Grayscale’s Ethereum Trust, other Ethereum ETFs are experiencing rising inflows.

“There’s a clear interest in these investments,” Kling explained. “If outflows continue to decrease and inflows remain strong, this could be a good time for Ethereum.”

Also Read: Top 3 Crypto Stocks to Invest in as Bitcoin Rebounds and Grows