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Antony Welfare, a former executive at Ripple Labs, recently sent a bullish warning to crypto skeptics, often referred to as bears. Welfare predicted an inevitable flood of capital into crypto once the Federal Reserve begins cutting interest rates.
Why crypto bears are wrong
Welfare highlighted that cryptocurrencies lead risk assets in rate-cut environments. His perspective is based on historical patterns, where investors move trillions in safe, high-yield assets when interest rates are high.
Notably, $7.4 trillion is currently sitting in money market funds (MMFs). Investors are parked here because high rates make it a no-brainer, with guaranteed returns with zero risk.
However, when interest rates are lower, yields drop and traditional assets like bonds become unattractive to investors.
The result is that trillions must "find a new home" chasing higher returns, according to Welfare.
To Welfare, bears yelling "crypto is dead" are ignoring macro forces. He emphasized that the total crypto market cap is pegged at $3.6 trillion.
Hence, Welfare has urged crypto bears to buy before more trillions arrive following the next rate cut.
Even if 5-10% of the $7.4 trillion in MMFs rotates into crypto, that is enough to return for the entire sector.
Interest rate cut expectations
Meanwhile, economists are expecting the Federal Reserve to cut rates twice before the end of 2025. They anticipate an interest rate cut by 25 basis points next week, and another likely in December.
However, the general expectation is that the Fed will carry out six rate cuts between now and 2026.
The Fed first cut rates this year in September by 25 basis points. This move followed concerns over a weakening labor market and elevated inflation risks from tariffs.
For now, there is still uncertainty about rate cuts this year, especially as Fed Chair Jerome Powell’s tenure ends in May.
Amid the rate cut speculations, crypto prices are showing rebound signals. Bitcoin (BTC), the top cryptocurrency, has surged 1.5% over the past 24 hours to $109,582.
Intriguingly, the BTC spike follows recent inflows into the spot exchange-traded fund (ETF) market.
Similar to Bitcoin, Ethereum (ETH), the top altcoin, surged 1.5% to $3,885. Other altcoins like Binance Coin (BNB), XRP, Solana (SOL) and Dogecoin (DOGE) also showed bullish signals.
BNB surged 2.3%, XRP rose 0.2%, SOL rallied 2.2% and DOGE jumped 1.76% within the same period.
Dan Burgin
Vladislav Sopov
U.Today Editorial Team