The announcement of the interest rate cut by the Federal Reserve Monetary Policy Committee (FOMC) on September 17-18. It brings about major changes that could have a huge impact on the economy and investment in digital assets.
..
The announcement of the interest rate cut by the Federal Reserve Monetary Policy Committee (FOMC) on September 17-18. It brings about major changes that could have a huge impact on the economy and investment in digital assets.
This effect has a very clear effect on the digital asset market. that are often sensitive to macroeconomic changes, such as interest rate cuts that may enhance liquidity and opportunities for growth In particular, lower borrowing costs can stimulate investment in high-risk assets. Many investors therefore view that this interest rate cut may be an important turning point that will stimulate even more investment in the digital asset market.
Basic overview of interest rates and the latest policy of the US Federal Reserve
Interest rates set by central banks play an important role in determining monetary policy. This has a direct impact on borrowing, spending, and investment decisions. Currently, U.S. interest rates It has decreased from the highest level in 23 years at 5.25%-5.50%, which is a result of strict measures to control inflation over the past two and a half years. Inflation has decreased from 7.1% to 2.5% after the COVID-19 crisis. Federal Reserve Bank Interest rates have been raised 11 times in just one year. To control inflation without causing the economy to enter a recession.
The recovery potential of the digital asset market
In terms of digital assets The impact of interest rate cuts is significant. Because in general Digital assets such as Bitcoin often react negatively to interest rate increases aimed at controlling inflation. On the other hand, interest rate cuts are often considered a positive factor for cryptocurrencies. which is considered a risky asset
Mr. Nirun Fuwattananukul, Chief Executive Officer of BINANCE TH, commented that “We expect this interest rate cut. It will have a significant impact on the value of digital assets. This is because lowering interest rates will help increase liquidity in the financial system. This will stimulate demand for investing in high-return and risky assets. For example, Bitcoin soared in value 375% between February 2020 and 2022 as interest rates near zero.”
Lowering interest rates reduces borrowing costs. This results in an influx of capital that tends to focus on riskier assets such as digital assets. Moreover, with their anti-inflation properties, This could make Bitcoin more likely to gain traction at a time when people are concerned about inflation. from forecasts of increased spending and borrowing. In addition, the depreciation of the US dollar exchange rate This usually coincides with a reduction in interest rates. This may help make digital assets play an even more important role. As a protection against the risk of currency devaluation
Specific factors affecting digital assets
In addition to macroeconomic factors Bitcoin and other digital assets There are also unique characteristics that may affect its growth prospects. One of these is the Bitcoin Halving, which in the past has often resulted in the value of Bitcoin rising within a period of 6-8 months. Although past results cannot predict what will happen in the future. But the Bitcoin Halving phenomenon may be a sign of direction for investors. When combined with the entry of Spot ETFs and increased liquidity from interest rate cuts, This may result in more funds flowing into the crypto market as well.
“The emergence of the Bitcoin Halving phenomenon and the recent launch of Spot ETFs. It is considered an important driving force that may help enhance liquidity from interest rate cuts to flow into the digital asset industry. which although September This is often a period when digital assets are weak. But prices tend to recover and bounce up again from October onwards. By reducing the interest rate this time. It is expected that this will add even more force, causing prices to bounce back even higher than before.”
In addition, while the Monetary Policy Committee of the US Federal Reserve Currently preparing to adjust monetary policy. Announcement of interest rate reduction this time. It could usher in a new era of economic recalibration, which could help spur the growth of the crypto industry as well.
“Although the impact from the US Federal Reserve’s interest rate cut That might affect the digital asset industry is still uncertain. But the signals has indicated that This policy change It might be a good time for investors. This is due to lower borrowing costs. and increased liquidity This makes the digital asset industry more interesting. In addition, from studying past trends. Including factors specific to digital assets It also reinforces that this policy adjustment It may be a stimulus that accelerates the growth of the digital asset industry as well,” Mr. Nirun Fuwattananukun concluded.