Bitcoin set to benefit whether FOMC cuts or holds rates: Bitfinex

The Consumer Price Index (CPI) came below the expected today, bringing the crypto market up and sparking expectations over an interest rate cut in the US at today’s Federal Open Market Committee (FOMC) meeting. Bitfinex analysts shared with Crypto Briefing that, despite a cut or a hold on the current rate, the outcome for crypto will be positive.

“Our base case is that the Federal Reserve will hold the rates. Whether the Fed cuts rates or holds them, the implications for Bitcoin and ETF flows are significant. A rate cut is likely to spur immediate bullish action, while a hold decision could result in a steadier but positive trend. Monitoring the Fed’s future policy direction will be essential for predicting long-term market movements,” they said.

Notably, both rate cuts and holding decisions have significant impacts on asset flows and market prices, the analysts added. Past decisions to cut rates have typically resulted in increased asset prices and exchange-traded funds (ETF) inflows, using the gold market as a benchmark. 

“Similar patterns are expected in the cryptocurrency market. All eight of the last CPI and FOMC events have caused increased volatility, at least on an intra-day or intra-week basis. Since March, however, this volatility increase has been short-lived.”

Although Bitfinex analysts don’t expect a rate cut decision to come out today, they expect that the Federal Reserve will follow movements from entities such as the European Central Bank in the following months. 

“The global liquidity cycle indicates that money supply is likely to increase, which can support asset prices, including cryptocurrencies. There has been relative weakness in crypto recently, as Bitcoin has declined significantly while equities are at all-time highs and remain resilient ahead of major bullish catalysts.”