The decision by the United States Federal Reserve to potentially pause and lower interest rates in 2024 is anticipated to positively impact cryptocurrencies and crypto-related stocks. In a Bloomberg interview on December 13, BlackRock fund manager Jeffrey Rosenberg highlighted this development as a “green light” for investors, noting the immediate positive response in the S&P 500, which rallied by 1.37%.
This optimistic outlook is also reflected in the performance of crypto stocks. Following the announcement, notable increases were observed in shares of companies like Coinbase and MicroStrategy, as well as Bitcoin miner Marathon Digital. Such movements suggest that the market is responding favorably to the Fed’s stance.
Henrik Andersson, Chief Investment Officer at Apollo Crypto, believes that the Fed’s pause and the prospect of reduced interest rates next year will boost both cryptocurrencies and crypto stocks. He also speculates that if major financial institutions like BlackRock and Fidelity launch Bitcoin ETFs, this could lead to a broader entry of traditional financial institutions into the crypto markets.
CoinShares’ recent report, indicating record inflows into blockchain equities, supports this positive sentiment. The report showed an unprecedented $126 million flowing into crypto-related stocks, alongside consistent inflows into digital asset investment products for eleven consecutive weeks.
CMC Markets analyst Tina Teng also views the Fed’s rate pause as a catalyst for increased interest in crypto products, aligning with broader risk-on sentiment and improved liquidity expectations. She anticipates a bullish trend similar to those seen in previous rate-cut cycles, potentially amplified by institutional interest in upcoming spot Bitcoin ETFs.
However, Andersson points out a potential downside to lower interest rates: the cooling of the real-world asset tokenization narrative. In a low-rate environment, the appeal of decentralized finance (DeFi) yields, which could exceed 10%, becomes more attractive compared to traditional yields.
Both Teng and Andersson also highlight the upcoming Bitcoin halving in April 2024 as a significant event that could further stimulate overall crypto market growth. This event, which historically has impacted Bitcoin’s price positively, is closely watched by market commentators and investors alike.
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