Crypto Markets Rebound Following US Federal Reserve’s Dovish Stance on Interest Rates

Crypto Markets Rebound Following US Federal Reserve’s Dovish Stance on Interest Rates

Crypto News – The cryptocurrency markets are experiencing a resurgence, bouncing back from a recent downturn earlier in the week. This positive shift in momentum is likely influenced by the latest update on interest rates from the U.S. Federal Reserve.

On December 13, the Federal Reserve’s Federal Open Market Committee convened for their December meeting. As many had anticipated, the Fed officials decided to maintain the interest rate at 5.5%.

Despite the steady interest rates, the outlook for 2024 is looking brighter due to declining inflation rates. Notably, there is now talk of potentially three rate reductions in 2024, a move that has injected optimism into both the cryptocurrency and U.S. stock markets.

The macroeconomic analysis platform, The Kobeissi Letter, pointed out that this was the Fed’s first notable mention of possible rate cuts in 2024. The publication highlighted a disparity between market expectations and the Federal Reserve’s stance, stating, “Markets are currently factoring in as many as six rate cuts in 2024, which is significantly more dovish than the Fed’s own projections.”

In a post-meeting press briefing, Federal Reserve Chair Jerome Powell remarked, “We’ve seen inflation recede from its peak levels, a trend that hasn’t brought about a notable rise in unemployment, which is very encouraging.”

He further stated, “It seems we are either at or close to the highest rate for this cycle.”

David Russell, the Global Head of Market Strategy at TradeStation, observed a significant shift in the Fed’s language, indicating a reduced urgency for aggressive monetary tightening.

Inflation, which had peaked at 9.1% in June 2022, saw a decrease to 3.1% year-over-year in November. Federal Reserve officials now forecast a further decline in inflation to 2.4% in the upcoming year and 2.1% by 2025.

In addition, projections from the central bank indicate an expected GDP growth of 1.4% and an unemployment rate of just 4.1% for the next year.

Investors are gearing up for what Gina Bolvin, President of Bolvin Wealth Management Group, termed the “Santa Claus Rally.”

In the realm of cryptocurrencies, the positive shift following the Federal Reserve’s dovish pivot wasn’t limited to U.S. markets alone. The overall market capitalization of cryptocurrencies experienced a 5% increase, reaching $1.68 trillion.

This uptick comes as the markets largely recover from this week’s leverage flush-out. Bitcoin’s value hovered just below $43,000, marking a 4.9% increase on the day. This current trajectory could see Bitcoin revisiting its 2023 high of $44,000 if the momentum persists.

Ethereum also saw a significant gain of 5.1%, reaching $2,272. Other altcoins, including Solana, Cardano, Avalanche, and Polkadot, have been performing notably well, with double-digit gains.