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The US Federal Reserve (FED) is cutting the key interest rate by 25 basis points. This decision is triggering euphoria in the crypto scene. Several factors now point to the continuation of the Bitcoin rally. If current trends continue, Bitcoin and other cryptocurrencies could benefit from the weakness of the US dollar.
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FED Cuts Key Interest Rate
The US Federal Reserve (FED) is now actually cutting the key interest rate – the organization announced this yesterday in a press release. Accordingly, the US key interest rate is falling by 0.25 percent to 4.00 to 4.25 percent.
The key interest rate is an acute point of contention in the United States of America. FED Chairman Jerome Powell has so far refused to lower interest rates. He considers high key interest rates necessary to combat inflation in the country. US President Donald Trump, on the other hand, did not let up – he repeatedly called for interest rates to be lowered.
Now Trump seems to have prevailed. According to his own statements, the 79-year-old US President wants to stimulate the economy with low interest rates and thus boost growth. In addition, he seems to be planning generous government spending, which he could finance more cheaply with low interest rates.
“The Committee [FOMC] decided to lower the target for the US Federal Reserve’s key interest rate by a quarter of a percentage point to 4 to 4.25 percent,” the FED reported yesterday.
In its statement, it made clear an ambivalent attitude towards the interest rate cut. “The Committee will carefully monitor new data, the evolving outlook and the balance of risks,” it said.
At the same time, the central bank made it clear that its long-term goal is a key interest rate of just two percent. The existing key interest rates would therefore have to be halved.
Further Key Interest Rate Cut to Follow: Will the Next Bitcoin Rally Start?
According to Quartz’s assessment, the FED has already suggested further key interest rate cuts, which could be implemented by the end of 2025. Accordingly, it is expected to implement a cut of 0.25 percent at each of two further FOMC meetings.
In the crypto scene, this trend is currently triggering great euphoria. Various factors suggest that these decisions will lead to a further strengthening of the crypto market, thereby triggering price gains for Bitcoin and other cryptocurrencies.
This could cause the inflation of the US dollar to continue to grow. While the fiat currency loses value and trust, more and more people are choosing cryptocurrencies as a refuge. In addition, a low key interest rate could lead to the careless uptake of new loans. Typically, low interest rates ensure further inflows into the market.
“Completely unexpected turn. Jerome Powell not only cut interest rates by 25 basis points, but the Fed also announced another 50 basis point cut by the end of 2025! This is bullish for the financial markets and for crypto!” wrote well-known crypto enthusiast Borovik on X.
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He added a GIF to his post showing Powell leading to the parabolic growth of crypto prices. In addition to the interest rate cut, other events also point to a medium- to long-term strengthening of the crypto market. Thanks to a new regulatory approach by the SEC, institutional funds worth billions could flow into the crypto market.
Because the FED is planning low interest rates in the long term, government bonds could fade into the background and cryptocurrencies could become increasingly important as investment assets. Crypto expert Arthur Hayes has therefore already predicted a Bitcoin price of one million US dollars.
The crypto market is already dominated by green numbers – both in the daily and weekly trends. The entire market has risen by 1.45 percent since yesterday.
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