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The interest rate decision on the interest committee in the Federal Reserve in the United States (FOMC) on May will be a decisive moment of assets on risk, including cryptocurrencies. While the consensus indicates a non -change in interest rates, Bitcoin (BTC) Altcoins can see gains if the US Treasury Department is obliged to inject liquidity to avoid economic recession.
The most active monetary policy can stimulate activity, but the Federal Reserve (Fed) also competes with the weakness of the US dollar. Some analysts argue that lowering interest rates in the United States may fail to stimulate growth with the continued stagnation risk, which may create an ideal environment for alternative hedge origins such as cryptocurrencies.
Economist and investor Jim Polsen notes that when the money that trades above the “neutral” interest rate (federal reserve funds is traded, including the annual basic consumption expenses index), the economy has moved historically towards stagnation or “stagnation”, a period of slow growth with a high unemployment rate and poor demand for consumer. Similar patterns since 1971 support this analysis.
According to Paulsen, the Federal Reserve is likely to be forced to reduce interest rates. Moreover, Central Bank President Jerome Powell is Under great pressure From US President Donald Trump, who criticized the Federal Reserve for not reducing the cost of capital quickly.
The reasons that make the Federal Reserve can start mitigating
Fears regarding the feverish markets still exceed the US consumer enlargement, the goal of 2 %, and unemployment rates in April 4.2 % indicate that there are no signs of economic weakness.
Market expectations, as reflected in the future of the Treasury, show a 76 % chance in interest rates by 4.0 % or less by September 17. This possibility dramatically decreased from 90 % on April 29, according to the CME Fedwatch tool.
Traders are increasingly confident that the Federal Reserve will reduce monetary policy. Although this may initially seem to be a decline in risk assets, it may push the cabinet to pump liquidity into the markets to support government spending.
Regardless of FOMC decision, some analysts indicate that the last treasury bonds cost $ 20.5 billion buying On May 5, intervention signals are renewed. Additional liquidity was historically as it was difficult for cryptocurrencies, especially since the US dollar is behind other major global currencies. Consequently, investors are increasingly looking for alternative hedges instead of keeping money.
Related to: Bitcoin price has increased 1550 % the last time that the “BTC RISK-UP” scale has decreased
US dollar index (DXY) Less than 100 decreased For the first time since July 2023, investors retract the American markets amid economic uncertainty. During, Gold rose More than 12 % in the past thirty days and is now traded by only 2 % of its highest level ever at $ 3500. The decline in confidence in the ability of the US Treasury to finance its debts prefers rare assets such as bitcoin.
While the possibility of multiple prices may reduce, this scenario is still favorable to encrypted currencies. If the Federal Reserve is pressed to expand its public budget, it is likely to enlarge and erode the value of fixed -income investment factors that ultimately supports cryptocurrencies.
This article is intended for general information purposes and does not aim to be and should not be considered legal or investment advice. The opinions, ideas and opinions expressed here are alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
