Crypto Stocks Surge as Bitcoin Returns to $63K Following U.S. Fed Rate Cut

Bitcoin surged to $63,000 after the United States Federal Reserve (Fed) reduced interest rates by 50 basis points (bps). This marks the Fed’s first rate cut in four years, signaling a significant shift toward an easing cycle after years of aggressive rate hikes.

🔸CRYPTO STOCKS RISE PREMARKET AFTER BITCOIN HITS OVER THREE-WEEK HIGH

🔸COINBASE GLOBAL UP 3.6%, BITFARMS UP 4.6%, MICROSTRATEGY UP 4.4%$COIN $MSTR

— *Walter Bloomberg (@DeItaone) September 19, 2024

Lower interest rates tend to encourage investment in riskier assets like cryptocurrencies, and the market reacted accordingly. Following the announcement, several crypto-related stocks saw notable gains.

MicroStrategy (MSTR) rose by 3.77%, while Coinbase (COIN) and Galaxy Digital (GLXY) increased by 2.1%-3%. Broader U.S. equities also climbed, with the Nasdaq and S&P 500 posting gains between 0.6% and 0.8%.

Fed Plans Another Rate Cut by Year-End

In its official press release, the Federal Reserve Committee stated that inflation is now on a sustainable path toward the 2% target. While risks to achieving employment and inflation goals have balanced out, the economic outlook remains uncertain. The Committee remains vigilant about factors that could impact its dual mandate of stable inflation and full employment.

Fed officials project that the benchmark rate could drop to 4.4% by year-end, indicating another 50 basis points of cuts across the next two Federal Open Market Committee (FOMC) meetings. Looking further ahead, the Fed’s dot plot suggests additional reductions of one percentage point by the end of 2025, with a half-point cut forecast for 2026. This signals a possible two-percentage-point decline in rates over the coming years.

Market Reactions and Future Outlook

Expectations for easier monetary policy have been growing since Fed Chair Jerome Powell indicated last month that it was time for a policy shift. The Fed needed to reassess its approach with inflation moderating and unemployment rising. Market participants were divided on whether the Fed would cut by 25 bps or 50 bps, leading to increased volatility in the run-up to the decision.

Before the announcement, the CME FedWatch Tool, which tracks market expectations for Fed rate changes, showed a 40% probability of a smaller cut and a 60% chance of a more substantial 50 bps reduction. The uncertainty caused fluctuations across financial markets. 

With the rate cut now in place and more reductions likely on the horizon, investors in both traditional and crypto markets are adjusting their strategies. As the Fed continues its easing cycle, cryptocurrencies like Bitcoin may potentially benefit, especially if interest rates keep falling and investors increasingly seek alternative assets. However, the future impact remains uncertain and will depend on various market factors.