What to Take Away
- After the Federal Reserve cut rates by 50 basis points, Bitcoin reached $63,000 per day.
- Lower rates could help digital forms of money and different resources saw as dangerous.
- A day later, a proposed $700 million debt offering to acquire additional bitcoin led to a rise in the price of MicroStrategy stock.
- Analysts said that bitcoin could benefit in the short term from looser monetary policy, but that could change if the Fed becomes negative about the economy.
- Following a cut in the Federal Reserve’s interest rate on Thursday, the price of Bitcoin (BTCUSD) increased by more than $63,000.
Rates reached a 23-year high as a result of the Fed’s long-term effort to combat inflation. The first cut of this cycle on Wednesday raised bitcoin prices by boosting investor confidence.
FXTM Senior Market Analyst Lukman Otunuga said that the Fed cutting rates “may be a welcome development for bitcoin bulls.” He also said that a sign of looser financial conditions can make people want to buy riskier assets like cryptocurrencies.
The price of Bitcoin increased immediately following the Fed’s announcement and has continued to rise in recent trading.
Momentum is increased in crypto-related stocks.
Thursday saw a 11% increase in shares of MicroStrategy (MSTR), which holds more than 244,000 bitcoins worth more than $15 billion at current prices. The company plans to raise $700 million through a debt offering in order to acquire additional bitcoins.1 Coinbase (COIN), a cryptocurrency exchange, saw its shares rise by 6% on Thursday, and Marathon (MARA), a bitcoin miner, saw their shares rise by more than 4%.
The Future of Bitcoin?
According to Grayscale’s Head of Research Zach Pandl, the Fed cut rates despite the fact that inflation risks remained somewhat elevated.
Pandl stated, “Central banks’ willingness to take risks with inflation tends to drive investors to store-of-value assets, like gold and Bitcoin,” adding that “over time bitcoin will benefit from lower rates and a weaker dollar” despite volatile markets immediately following the announcement.
A negative monetary standpoint from the Fed could prompt a bitcoin inversion even in situations where rates are cut further, Otunuga said.
