The financial landscape recently experienced significant shifts with two major events: Donald Trump’s victory and the U.S. Federal Reserve’s decision to cut interest rates. These developments have greatly influenced the crypto market, particularly Bitcoin, which has shown a strong reaction to U.S. financial news. With Bitcoin’s price nearing a record high of $77,000, the cryptocurrency has demonstrated remarkable stability amidst these changes.
Fed’s Strategic Shift in Monetary Policy
The U.S. Federal Reserve announced a reduction in its benchmark federal funds rate by 25 basis points, bringing it down to a range of 4.5%-4.75%. This move aligns with market predictions and follows a trend among global central banks to relax monetary policy. In anticipation of this rate decision, Bitcoin surged to an unprecedented high of $76,700, reflecting its sensitivity to such economic shifts.
The rate cut follows Donald Trump’s electoral victory, which is consistent with his frequent advocacy for lower interest rates as a means to stimulate economic growth. Although Trump doesn’t directly influence Fed policies, the rate reduction aligns with his economic strategy and campaign promises for significant interest rate cuts. This marks only the second rate cut in four years, breaking a prolonged period of inactivity.
The Fed’s press release stated, “Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee’s 2% objective but remains somewhat elevated.” This announcement came on the heels of the Bank of England’s decision to lower its rates by 25 basis points and a similar move by Sweden’s Riksbank, which reduced its key interest rates by half a percentage point. Following the Federal Open Market Committee’s (FOMC) decision, Bitcoin’s price stabilized at approximately $76,718, maintaining its newly achieved all-time high and reflecting a 1.8% increase within 24 hours.
Future Projections for Fed’s Interest Rate Policy
As investors keenly await Fed Chair Jerome Powell’s comments on the central bank’s future direction, speculations mount regarding the impact of Donald Trump’s decisive victory in the U.S. election on these policies. Trump’s proposed economic strategies, which emphasize tax reductions, tariffs, and deregulation to foster economic growth, could potentially drive inflation upward. This scenario might compel the Fed to adopt a more conservative stance, possibly slowing, halting, or even reversing its recent rate cuts.
Market sentiment has shifted in response to these developments. The likelihood of the Fed maintaining the current rates in their December meeting has risen to 35%, a significant increase from 14% a month ago, as reported by the CME FedWatch Tool. This news has had a favorable impact on Bitcoin, which recorded substantial gains throughout November. The cryptocurrency experienced a surge when Donald Trump surged ahead in the presidential election, surpassing its previous all-time high set in March amidst growing indications of his return to the White House.
Currently, Bitcoin has seen an 8% increase over the week and a more than 22% rise over the past month. With its market capitalization now exceeding $1.5 trillion, Bitcoin ranks as the ninth-largest financial asset globally, underscoring its growing influence and stability amid global financial shifts.
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