The Federal Reserve has initiated its long-anticipated easing cycle, potentially setting the stage for a bullish trend in risk assets, including Bitcoin BTC/USD and other cryptocurrencies, according to industry experts.
What Happened: Economist and crypto analyst Alex Krüger took to his X account to highlight the Fed’s decision to implement a 50-basis point cut while projecting an additional 50 basis points of cuts for 2024.
This balanced approach, Krüger suggests, has struck a “sweet spot” by addressing concerns about the Fed falling behind the curve while simultaneously demonstrating control rather than reactionary measures.
For cryptocurrency enthusiasts, Krüger sees a bullish outlook for Bitcoin, though he cautions that its trajectory may be heavily influenced by the upcoming U.S. election results.
He even suggested a bold strategy for altcoins: “For altcoins, go max long early in Election Night if Trump is coming up ahead in the counts. That’s my plan.”
Krüger emphasized the robust state of the U.S. economy, a factor he considers crucial for risk assets. He pointed out a historical trend: "Historically when the Fed begins its easing cycle with no recession, equities have rallied 10% in six months, while if the Fed begins the cycle in a recession, equities have fallen by 12%.”
Why It Matters: Economic strength was echoed in Fed Chair Jerome Powell's statement: "I don’t see anything in the economy that suggests the likelihood of a downturn is elevated. You see growth at a solid rate, you see inflation coming down, you see a labor market that’s still at very solid levels."
However, Krüger also tempered expectations, noting that U.S. equities are not cheap and that a return to a real negative rates environment is unlikely in the near future. He observed a significant divergence between market expectations and Fed projections for 2025, with the market pricing in a 25% probability of a hard landing.
In conclusion, Krüger’s analysis suggests that while the Fed’s easing cycle could boost risk assets, including cryptocurrencies, investors should remain vigilant of economic indicators and political developments that could shape market trends in the coming months.
What’s Next: The influence of Bitcoin as an institutional asset class is expected to be thoroughly explored at Benzinga’s upcoming Future of Digital Assets event on Nov. 19.
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This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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