Bitcoin surges more than 2% as Fed cuts rates by 0.5% for the first time since 2020

TSAI

The value of leading cryptocurrency Bitcoin has risen by about 3% following the announcement of a rate cut on September 19, 2024.

Bitcoin Price Hits Records

According to data from Coinmarketcap.com, Bitcoin was trading in an upward trend, up 2.63% to $62,120.22 as of 9:08 a.m. on September 19. The move is in line with typical investor behavior, where lower interest rates drive demand for riskier assets. Despite the recent gains, Bitcoin has remained relatively stable since hitting an all-time high of nearly $74,000 in March.

Fed Rate Cut

On Wednesday, September 18, the Federal Reserve announced a 0.5 percentage point cut in its benchmark interest rate, the first rate cut by the U.S. central bank in more than four years. The decision comes months ahead of the November presidential election.

Sharp rate cut forces the Fed to tackle new obstacles

The move is expected to have a far-reaching impact on the economy as it will affect the interest rates banks charge for lending to individuals and businesses. The decision is expected to affect borrowing costs for consumers, including home mortgages and credit card debt.

Fed meeting live updates: Powell-led FOMC cuts benchmark rate by 50 basis points

The rate cut also marks a change in the Fed's recent strategy of maintaining high interest rates to curb inflation. The Fed is currently close to its long-term inflation target of 2%.

Market reaction to Bitcoin price

According to Bloomberg, Karim Dandashy, an OTC trader at Flowdesk US, commented, "After several weeks of back-and-forth fluctuations between 25 and 50 basis points, the market has received some relief, so there has been a knee-jerk reaction and a move higher."

Spencer Hallarn, global head of OTC trading at cryptocurrency investment company GSR, said, "This could theoretically indicate that the Fed cut rates by 50 percentage points because they are worried about something. If they think we are on the verge of a recession, then they may feel more urgently the need to cut rates quickly," Bloomberg quoted him as saying.

Why the Fed is betting on a big rate cut

The cryptocurrency community remains optimistic about the future of Bitcoin. Hedge fund manager Anthony Scaramucci said earlier on Wednesday that interest rate cuts coupled with increasing regulatory clarity for the U.S. crypto industry could drive Bitcoin to new highs, Bloomberg reported.