The crypto world is buzzing about the possibility of the Federal Reserve cutting interest rates soon. A recent rally was fueled by positive comments from Fed Chair Jerome Powell, but the excitement really ramped up after weaker-than-expected job numbers came out on September 5th. Surprisingly, this weak job data might actually be good news for crypto.
Weak Jobs Report: A Sign of Rate Cuts?
August’s job growth was way lower than predicted – only 22,000 new jobs, compared to expectations of 75,000. Big banks are now saying this could mean the Fed will cut interest rates.
-
Bank of America: Initially thought there’d be no rate cuts in 2025, but now predicts at least two 25 basis point cuts – one in September and another in December.
-
Goldman Sachs: Is even more bullish, predicting three 25 basis point cuts before the year’s end (September, October, and November).
-
Citigroup: (From an earlier report) Also predicted three 25 basis point cuts in September, October, and December.
Lower Rates, Higher Crypto Prices?
Lower interest rates are generally good for riskier investments, including crypto. When safer investments like bonds become less appealing, investors often shift to riskier assets like cryptocurrencies. Historically, rate cuts have often been followed by crypto price increases and sustained bull runs. Conversely, higher rates tend to drain liquidity from the crypto market.
Right now, the total crypto market cap is around $3.09 trillion, down slightly from the previous day. But with the potential for rate cuts on the horizon, things could be about to change.