Goldman Sachs, a prominent figure in investment banking, has repositioned its projection regarding the Federal Reserve’s anticipated interest rate cut. Previously slated for the fourth quarter, Goldman Sachs now anticipates this cut to occur in the third quarter of 2024, as detailed in a recent report by Reuters.
This adjustment corresponds with the notable surges witnessed in Bitcoin (BTC) and the broader crypto market. These surges have been fueled by an amalgamation of optimistic factors, including the imminent launch of a spot ETF in the United States, the impending Bitcoin mining reward halving, and a decline in the 10-year U.S. Treasury yield, commonly known as the risk-free rate.
As of now, the Federal Reserve’s benchmark interest rate ranges between 5.25% and 5.5%. However, traders active in the Fed funds futures market are projecting a decrease to a range commencing at 4% by the conclusion of the upcoming year. The reduction in interest rates typically leads to a scenario where borrowing becomes more financially feasible. This, in turn, stimulates an environment conducive to risk-taking across both the broader economy and financial markets, including the realm of cryptocurrencies.
Conversely, a rapid upsurge in interest rates, reminiscent of the occurrences witnessed in 2022, can have contrasting effects. In March of that year, the Federal Reserve commenced its tightening cycle to curb inflation, initiating rate hikes from as low as 0% to 0.25%. The most recent rate increase took place in July of the same year. This swift elevation in borrowing costs weighed heavily on various risk assets, contributing to adverse effects in the realm of cryptocurrencies and other associated financial entities.
Image by freepik
Disclosure Statement: Miami Crypto does not take any external funding, or support to bring crypto news to the readers. We do not have any conflicts of interest while writing news stories on Miami Crypto.