The cryptocurrency market has recently been abuzz with significant developments. Beyond the noteworthy electoral victory of Donald Trump, the U.S. Federal Reserve’s decision to slash interest rates by 25 basis points has further fueled this excitement. Bitcoin, the leading cryptocurrency known for its sensitivity to U.S. financial news, has reached unprecedented heights, touching a record near $77,000 and maintaining its stability.
Fed Goes Easy on Monetary Policy
In a move that aligned with market forecasts, the U.S. Federal Reserve reduced its benchmark fed funds rate by 25 basis points, bringing it to a range of 4.5%-4.75%. This decision, announced on a Thursday, follows a pattern seen in other central banks that are also opting for more accommodating monetary policies. In the lead-up to the rate announcement, Bitcoin surged to a new all-time high of $76,700.
This reduction in interest rates aligns with Donald Trump’s economic perspectives, which have consistently advocated for lower rates to stimulate economic growth. While the President does not directly influence Federal Reserve decisions, the rate cut is congruent with his economic strategies and campaign promises, where he has frequently called for significant reductions in interest rates.
The recent rate cut marks a departure from a lengthy pause, representing only the second reduction in four years. The official statement from the Federal Reserve noted, “Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee’s 2% objective but remains somewhat elevated.”
On the same day, the Bank of England and Sweden’s Riksbank also opted for rate reductions, with the latter decreasing key interest rates by half a percentage point. In the wake of the FOMC’s decision, Bitcoin’s price stabilized at approximately $76,718, reflecting a 1.8% increase over the past 24 hours.
Will Fed Maintain Rates?
With Donald Trump’s decisive election victory in the United States, investors are closely monitoring Fed Chair Jerome Powell’s remarks regarding the central bank’s future policy direction. The president-elect’s economic plans, which include tax cuts, tariffs, and deregulation, aim to bolster economic growth but may also drive inflation, prompting the Fed to consider a more cautious stance.
This potential shift could lead to a slowdown, a pause, or even a reversal of the recent rate cuts. The market sentiment has evolved accordingly, with the likelihood of the Fed maintaining the current rates at the December meeting now standing at 35%, up from 14% a month ago, as indicated by the CME FedWatch Tool.
These developments have been favorable for Bitcoin, which has experienced notable gains throughout November. The cryptocurrency surged when Donald Trump gained traction in the presidential election earlier this week, surpassing its previous all-time high set in March as the likelihood of his return to the White House became more apparent.
Currently, Bitcoin has risen 8% over the week and over 22% in the past month. With its market capitalization now exceeding $1.5 trillion, Bitcoin has established itself as the ninth largest financial asset globally.
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