- Bitcoin has jumped more than 5% in the past 24 hours after the Fed chairman signaled that a rate cut was imminent.
- Cryptocurrency prices often perform better in a lower interest rate environment.
- The broader cryptocurrency market has rallied, with several cryptocurrencies in key categories posting significant gains.
- Rising stablecoin market capitalization indicates stronger buying pressure.
Bitcoin (BTC) gained nearly 5% alongside a surge in the cryptocurrency market over the past 24 hours following indications of an interest rate cut from Federal Reserve (Fed) Chairman Jerome Powell’s speech Friday morning.
Bitcoin’s Love for Low Interest Rates
In his speech, Powell stressed that the labor market had cooled and that “conditions are now less tight than those that prevailed before the pandemic.” Therefore, “the time has come for policy to adjust,” he said.
Bitcoin and the cryptocurrency market have historically seen higher prices when interest rates were low. This is evidenced by the rise of the cryptocurrency market and the ICO boom in 2017, when rates were hovering around 0.75%-1% and 1%-1.25%. However, the market began to correct when the Fed started raising rates in 2018.
BTCUSD/USDINTR
The cryptocurrency bull cycle from 2020 to 2021 also paints a similar picture. After the Fed cut rates to 0%-0.25% following the pandemic, Bitcoin began to see a surge, increasing by over 1,000% in a year. However, the market began to retreat in 2022 when the central bank started raising rates again.
Bitcoin and Cryptocurrency Market Rebounds After Fed Chairman Confirms Interest Rate Cut
Shortly after Powell’s speech on Friday, Bitcoin rose above $63,000 for the first time since August 2, when the market began its decline.
The broader cryptocurrency market has surged alongside Bitcoin, with several tokens in the top 50 posting significant gains. Ethereum (ETH) appears to be mirroring Bitcoin’s price, also rising more than 5% on the day.
In the Layer 1 altcoin space, Solana (SOL), Avalanche (AVAX), Near Protocol (NEAR), Aptos (APT), and SUI are showing strength with gains of over 4%, 8%, 11%, 12%, and 20%, respectively.
The AI token category is led by Artificial Super Intelligence (ASI), Bittensor (TAO), and Render (RNDR), which have surged 19%, 12%, and 23%, respectively. Meme coins have also seen notable gains, led by Dogecoin (DOGE) and Shiba Inu (SHIB), each up over 7% in the past 24 hours.
Gains in these sectors saw the overall cryptocurrency market capitalization increase by more than 3% on Friday.
Cryptocurrency Market Capitalization
Meanwhile, as buyers dominate the market, short traders have suffered huge losses, suffering more than $91 million in liquidations on Friday.
The price rally in the cryptocurrency market could continue in the coming weeks when the Fed eventually cuts rates. This thesis is supported by the rise in the market capitalization of stablecoins. The market capitalization of stablecoins reached a new record of $165 billion during the week, according to data from CryptoQuant.
Total market capitalization of stablecoins
The increase in the market capitalization of stablecoins often correlates with higher prices for Bitcoin and the broader cryptocurrency market, as it signifies an influx of new capital.
