Bitcoin has surged to a new intraday high of $42,476 on the Bitstamp exchange. This spike offers a much-needed respite to traders following a recent selling streak.
This rally can be attributed to Federal Reserve officials holding the current rates steady predicting potential rate cuts in 2022.
Historically, Bitcoin has shown to benefit from lower interest rates since they tend to decrease the yield on government securities, thus making alternative investments like cryptocurrencies more attractive.
No more rate hikes
The U.S. Federal Reserve's latest announcements have significantly impacted financial markets. Rate futures now indicate over a 60% likelihood of a rate cut in March 2024.
There has been an immediate rise in U.S. interest rate futures for a May rate cut to 90%, up from 80%.
Following the Fed's actions, yields on U.S. 2- to 7-year securities have experienced a decline of over 15 basis points.
These developments suggest a more accommodative monetary policy in the near future, potentially fueling further growth in risk assets like Bitcoin.
During a press conference, Fed Chair Jerome Powell predicted that further rate cuts remain unlikely.
Gold price on the rise
In tandem with Bitcoin's rise, spot gold prices have also seen an uptick, last up by 0.7%. This increase in gold prices is a direct response to the Fed's decision.
Typically, gold is viewed as a hedge against inflation and currency devaluation. With the Fed's signal of potential rate cuts and lower inflation projections, investors seem to be turning to gold as a safe haven.
The Fed's projections include a core inflation rate of 3.2% by the end of 2023, decreasing to 2.0% by the end of 2026, alongside a gradual slowdown in GDP growth.
Denys Serhiichuk
Godfrey Benjamin
Tomiwabold Olajide
