The Double Edge Of The Fed: The Rate Cut That Rocks Crypto Markets And Tests The Game-Changer Narrative

The U.S. Federal Reserve decides to cut the policy rate by 25 basis points and halts the process of quantitative policy tightening. Markets start reacting to it in just hours: major cryptos go down, while volatility reaches new heights because investors begin to revalue the new inflation hedge in less than an hour with loosened monetary policies. The price of one Bitcoin falls below the mark of US$109,000, while the total market cap of the global crypto market falls. There is only one question in mind: Does monetary easing help crypto, or is there something to the story that is very weak? The Fed reduced interest rates by 25 basis points and announced it would stop shrinking the balance sheet. The decrease in rates should make it even cheaper to borrow, and it should theoretically lure investors to search for higher-risk investments with higher rewards, even in cryptocurrency markets. The action in the market shows it doesn’t work that way. Some markets go up, and others go down. Markets are far more complex than that.Nevertheless, the view of politicians and forward guidance is of comparable importance to the policy itself. Markets can be unsettled by the encouraging yet indecisive Fed outlook, while volatility punishes uncertainty swiftly. The current signals of the Fed on the future timeline instill more volatility than the actual policy cut itself.Within 24 hours, the price of Bitcoin corrects by a few percentage points, while the values of Ethereum and other altcoins start to follow suit in line with the market trend. The market capitalization of cryptocurrencies is expected to go back below major psychological markers in line with market risk aversion moods across the world in general.At the same time, equities and the U.S. dollar see mixed action while the stronger dollar and aggressive rhetoric can play havoc with the risk-on impact of the rate cut, resulting in erratic and downright puzzling action where correlation rules between stocks, dollars, and crypto go haywire.

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