Crypto markets went wild on Friday, August 22nd, after Federal Reserve Chair Jerome Powell hinted at a possible interest rate cut. This sent shockwaves through the financial world, with many cryptocurrencies reaching new highs. Ethereum, for example, briefly hit a new all-time high.
Is a September Rate Cut a Sure Thing?
Investment expert Jim Bianco analyzed Powell’s speech, calling it a “Rorschach test” – meaning it could be interpreted in many ways. While Powell didn’t explicitly commit to a rate cut, Bianco initially estimated an 80% chance of one happening in September.
This prediction depended on two key economic reports: the August jobs report and the August Consumer Price Index (CPI). Both reports, due out before the September 18th Federal Open Market Committee (FOMC) meeting, will heavily influence the Fed’s decision.
Interestingly, after Powell’s speech, Bianco’s prediction remained at roughly 80%. He believes the possibility of a rate cut hasn’t changed significantly and still hinges on the early September economic data. He jokingly summarized the situation as: a September rate cut is mostly a done deal, but not quite.
What Does This Mean for Crypto?
Lower interest rates generally make riskier investments, like crypto and stocks, more appealing. When the Fed cuts rates, investors often move money into assets with higher potential returns. Historically, Bitcoin and other cryptocurrencies have seen price increases following Fed rate cuts.
Therefore, a September rate cut could be good news for the crypto market, potentially driving further investment into cryptocurrencies. The total cryptocurrency market is currently valued at around $4.07 trillion.