After the Federal Reserve of the United States decided to reduce interest rates for borrowing money, the first reduction in interest rates in four years, Bitcoin surged beyond the $62,000 level
On September 18, the U.S. Federal Reserve reduced its benchmark federal funds rate by 50 basis points to 4.75%-5%, concluding an aggressive rate-hiking cycle that had prevailed over the previous year.
In a recent press release, the central bank expressed heightened confidence in achieving sustainable inflation near the 2% target. It stated that the risks to its employment and inflation objectives are now more evenly distributed.
This rate reduction is the first since the global economy was disrupted by the COVID-19 pandemic more than four years ago. As is frequently the case with lower interest rates, the easing of monetary policy has increased demand for risk assets, resulting in a favorable trend for Bitcoin.
In response to Federal Reserve rate reductions, the value of bitcoin experiences an increase.
Numerous analysts believed that the interest rate reductions had already been incorporated into the pricing of hazardous assets, such as bitcoin.
Nevertheless, Arthur Hayes and other figures have contended that the market could be adversely affected by such actions by the U.S. Federal Reserve. However, he was speaking with a long-term perspective. Conversely, Bitcoin’s price has experienced a favorable short-term response.
Bitcoin had already increased from $57,600 to $60,000 prior to the official announcement.
Bitcoin experienced substantial volatility in the hours immediately following the Federal Reserve’s decision to implement a 50 basis point reduction, with its price fluctuating up and down on multiple occasions.
Bitcoin was trading at $61,969 at the time of writing, which represents a 2.8% increase, according to data from crypto.news.
The daily trading volume of the crypto asset had increased by 17%, hovering at approximately $48.2 billion, while its market capitalization was $1.22 trillion.
The daily liquidations have increased to $200 million, with the preponderance of the funds originating from short positions. Bitcoin is the most prominent, with $75 million in liquidated positions, followed by Ethereum with $35 million.
As indicated by Alternative data, Bitcoin’s fear and avarice index has transitioned from fear to neutral.
The Federal Reserve’s decision was precipitated by Chairman Jerome Powell’s remarks at the Jackson Hole symposium last month, during which he suggested that a policy adjustment was necessary in light of the increasing unemployment rate and the slowing inflation.
Prior to Wednesday’s decision, market sentiment was divided. Traders were in disagreement as to whether the Federal Reserve would implement a 25 basis point reduction or a more considerable 50 basis point reduction.
The market had expected a 40% probability of a lesser cut, with a 60% probability of the larger 50 bps reduction, as indicated by the CME FedWatch Tool. Ultimately, the latter occurred.
