The US Federal Reserve (Fed) has just announced a cut in its interest rates this Wednesday, September 18, marking a major turning point in its monetary policy. This decision, long anticipated by the markets, could have significant repercussions on the crypto ecosystem, particularly Bitcoin.
A monetary shift with uncertain consequences
The Fed, after pursuing an aggressive monetary tightening policy since 2022, is changing course. The Monetary Policy Committee decided to lower the target range for the key interest rate by half a percentage point, to between 4.75% and 5%. This reduction aims to support the economy in the face of an uncertain outlook, while recognizing the progress made on inflation.
” Economic activity continued to grow at a strong pace, although job creation slowed and the unemployment rate increased slightly“, we can read in the Fed statement. He also noted that ” Inflation has moved towards the Committee's 2% target, but remains somewhat elevated”.
The decision was not unanimous within the Committee. Michelle W. Bowman voted against the measure, preferring a more moderate reduction of a quarter of a percentage point.
The magnitude of this decline raises questions. Such a large reduction could be seen as a signal of economic concern, while a more moderate decline could have been interpreted as a more cautious approach.
The impact of this decision is already being felt in financial markets. Investors, accustomed to a predictable Fed, must now navigate a more uncertain environment. This situation could lead to increased volatility, particularly on risky assets such as stocks and cryptocurrencies.
Bitcoin, between opportunities and risks
Contrary to expectations, the rate cut may not be as beneficial for Bitcoin as one might think. Arthur Hayes, former CEO of BitMEX, offers an interesting explanation: the mechanism of reverse repurchase agreements (RRPs) could divert liquidity from risky assets, including Bitcoin.
RRPs currently offer attractive yields, attracting money market funds to the detriment of other investments. This could limit the inflow of capital into Bitcoin, despite a theoretically favorable context.
Even more alarming, a recent report from Bitfinex predicts a possible 15-20% drop in Bitcoin’s price following this rate cut. This prediction flies in the face of the conventional wisdom that monetary easing is always positive for cryptocurrencies.
The Fed’s rate cut marks a crucial turning point for the US economy and the crypto market. While traditionally seen as favorable to risky assets, this decision could have unexpected consequences for Bitcoin.
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