Zinger Key Points
- Experts express concern over ongoing inflation pressures despite potential market benefits from the anticipated lower interest rates.
- Lower rates could boost investment, particularly in risk-on assets like cryptocurrencies, as borrowing costs decrease.
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Federal Reserve Chair Jerome Powell‘s remarks on Friday signaling potential interest rate cuts have ignited cautious optimism among financial experts, particularly in the cryptocurrency sector.
What Happened: Industry experts are drawing parallels to previous rate cuts and their historical impact on digital assets, while also acknowledging the broader economic implications.
Powell's remarks, centered on the Fed's growing confidence in the battle against inflation, signaled a shift in focus from an aggressive stance on price stability to a more balanced approach that also considers employment.
"My confidence has grown that inflation is on a sustainable path back to 2 percent," Powell stated, but he refrained from committing to specific timelines or amounts for the anticipated rate cuts.
Speaking with Benzinga, Azeem Khan, Cofounder of Morph, expressed a tempered view, balancing optimism with ongoing economic concerns.
“As a U.S citizen, I won’t say looking around that I have as much confidence about combatting inflation when I see what things around me cost,” Khan noted.
Also Read: Russia To Launch Crypto Exchanges In Moscow And St. Petersburg: Is A New BRICS Stablecoin Coming?
However, he added that lower rates could incentivize business investment, potentially driving up valuations. “In all, I’m cautiously optimistic about it all,” he concluded.
Drawing parallels to the Fed's last major rate cuts in March 2020, Leena ElDeeb, a Research Associate at 21Shares pointed out that the reduction in borrowing costs could lead to a significant expansion in investor appetite.
"The total crypto market cap increased by about 450% towards the end of [2020] and Bitcoin's BTC/USD price surged by 200% in the same time period," she recalled.
While the current economic context is different, ElDeeb suggested that the Fed's recent actions, combined with global liquidity trends, could create a favorable environment for another crypto boom.
Prominent investor Mike Alfred offered a more bullish perspective, framing Powell's speech as a "victory lap" for the Fed's efforts to achieve a soft landing.
"Inflation has come down dramatically since 2022 without any major deterioration in the labor market," Alfred said, adding that Powell's indication of potential rate cuts provided further cause for optimism. "Bullish," he said.
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