Fed Rate Cuts Seem to Stimulate Bitcoin Bulls

Crypto News – Highlights such as the upcoming halving and the approval of spot ETFs have led to an overall increase in Bitcoin’s price. But despite all this, the cryptocurrency ancestor may be facing some hurdles.

Fed Rate Cuts Seem to Stimulate Bitcoin Bulls

MacroMicro’s historical data reveals that the Fed’s interest rate cut cycle ultimately had a negative impact on Bitcoin. Namely, the start of a rate cut usually coincides with periods of economic stagnation. This is followed by a short but significant rally in the US dollar. This suggests that if history repeats itself, Bitcoin is likely to experience a short but intense risk aversion later in the year if the Fed cuts rates.

The Negative Impact of the Economic Recession on Bitcoin

A lengthy period of falling economic output and rising unemployment is referred to as a recession. A recession can cause a dramatic drop in investors’ willingness to take on risk and asset price deflation if market forces are not reined in. Therefore, central banks frequently use monetary stimulus to counteract the same.

As a global reserve currency, the dollar plays a significant role in non-bank borrowing, international debt, and global trade. As a result, investors are forced to reduce their exposure to riskier assets like Bitcoin when financial conditions tighten.