As a seasoned researcher with over two decades of experience in financial markets and blockchain technology, I find myself intrigued by the latest moves by the Federal Reserve and their potential impact on the cryptocurrency market. With a background in economics and a keen interest in the intersection of traditional finance and emerging technologies, I can’t help but see the implications of the Fed’s recent stance on interest rates and its potential effects on supply-capped digital assets like Bitcoin (BTC), Binance Coin (BNB), Ripple (XRP), and Cardano (ADA).
At present, the interest rate for large, overnight loans obtained from the U.S. central bank during money market transactions falls between 5.25% and 5.5%.
During his speech in Jackson Hole, Wyoming on Friday, investors anticipated additional hints suggesting a period of interest rate reductions. Surprisingly, Powell didn’t just suggest cuts, but went ahead and openly endorsed them. In fact, he stated that the question is not whether there will be cuts, but rather how significant those cuts should be.
It’s now appropriate to modify our policies. The path we should take is obvious, but the specific moments for reduction and speed at which they are implemented will be influenced by new data, changes in the overall picture, and the balance between potential risks.
How It Could Affect Cryptocurrency Prices
Reduced interest rates and an increase in the circulation of dollars might boost crypto prices, particularly for blockchains that have limited token supplies. These digital assets are similar to inventories with fixed maximum limits. In an economy with lower interest rates for the dollar, their value could increase significantly, making them more akin to scarce resources or precious commodities.
Tom Porcelli, U.S. chief economist at PGIM Fixed Income, said:
“It seems unlikely that the Federal Reserve needs to worry about inflation at present. Instead, their current focus appears to be on employment issues rather than inflation. This is because their current policies are geared towards a level of inflation significantly higher than what we’re experiencing now.”
Additionally, the Bureau of Labor Statistics has revised downward the initial Q1 job growth figure by a million jobs compared to the original estimate. This weakened job market, coupled with decreasing consumer prices, provides the Federal Reserve with both the chance and motivation to implement substantial interest rate reductions.
Providing an ample supply of less expensive credit helps stimulate economic growth among traditional businesses. It also benefits autonomous Web3 businesses that operate on the blockchain.
Contrary to traditional currencies like the US Dollar, managed by central banks without a fixed limit, the following four cryptocurrencies possess rigid supply ceilings that prevent unchecked growth. This attribute appeals to some crypto investors as it implies that an increase in dollar supply could potentially bolster the prices of these digital assets.
1. For Keeps: Bitcoin (BTC)
Bitcoin’s price is consistently monitored by crypto traders, similar to how benchmark interest rates and energy prices per kilowatt hour are tracked. The groundbreaking and leading cryptocurrency initially gained popularity due to its unique, limited supply structure.
The dollar is plummeting
Now negative for the year— Tom Crown (@TomCrownCrypto) August 21, 2024
When the Federal Reserve resumes its policy of lowering interest rates, often referred to as a “dovish” Fed stance compared to an increasing interest rate policy known as a “hawkish” Fed, it typically bolsters Bitcoin’s long-term economic fundamentals relative to the US dollar. In periods of market growth, this could lead to substantial short-term increases in Bitcoin price.
2. Build And Build (BNB) Staying Big
Keep an eye on Binance Coin (BNB) as it’s another digital asset with a capped supply that could be significant when the Federal Reserve resumes adjusting interest rates. BNB serves as the primary token within the Binance platform, offering fee reductions and various advantages.
Beyond being used by traders as the default exchange currency on Binance, BNB also serves as the foundational token for smart contracts in the Binance Smart Chain (commonly referred to as Build ‘N’ Build Chain). These tokens are versatile and can accommodate a wide range of autonomous features.
Today saw Binance Coin leading among the top cryptocurrencies with impressive 24-hour gains, while Bitcoin, Ethereum, Solana, and Dogecoin experienced minor setbacks for correction. There’s a strong possibility that Binance Coin prices will surge again soon. Changpeng Zhao, the founder of the crypto exchange who also served as its former CEO, is nearing completion of his four-month jail sentence in just a few weeks.
The cryptocurrency remained up nearly 7.5% for the week on Sunday, and 2.4% for the 1-month timeframe. It’s up 165% for the trailing 12-month period.
3. Ripple (XRP) Is Connecting The World
Ripple’s XRP tokens strive to unite the globe. This is made possible through RippleNet’s swift, cost-effective, secure, and dependable systems designed for fast international transactions between banks and financial institutions, particularly for cross-border payments.
Beginning December 2020, XRP has been contending with challenges due to the SEC lawsuit. However, as more court victories stack up, both the long-term and immediate future prospects of XRP appear hopeful.
As a seasoned cryptocurrency trader with over a decade of experience under my belt, I have seen countless market fluctuations and trends. Based on my observations, the recent surge in Ripple prices this week, coupled with the substantial increase in daily trading volume by 60%, seems to suggest a promising short-term market gain. This positive momentum could potentially push the asset towards resistance at $0.65. However, I always advise caution when making investment decisions, as the crypto market can be unpredictable and volatile. In my experience, it’s essential to thoroughly research any investment before diving in.
1) Over the past seven days, Ripple (XRP) saw a 6% increase, and it also rose by over 2% in the last month. On an annual basis, XRP has experienced a growth of 16%.
As someone who has closely followed the evolution of cryptocurrencies over the past decade, I can confidently say that supply-capped digital currencies have a significant impact on their market value. My personal investment journey in this space has taught me that the relative supply compared to traditional central bank currencies, such as the US dollar, plays a crucial role in determining the price of these cryptocurrencies on exchange markets.
4. Cardano (ADA) Is Change Making On
As the Cardano Alonzo upgrade advances towards completion, there’s a possibility that cryptocurrency markets will favor Cardano (ADA) by potentially increasing its price on digital exchange platforms, given that it serves as an alternative to Ethereum.
With the Chang update, token holders will gain increased control over the network’s management, thereby empowering them. This improvement is expected to boost ADA‘s worth by adding additional functionalities and advantages, while also reinforcing its decentralized structure.
On Wednesday, the price of Cardano experienced significant growth compared to other top cryptocurrencies, with a 24-hour increase of approximately 7%. Over the past seven days, this momentum has resulted in a weekly gain of 8.6% for Cardano, with each day’s candle representing a rise of around 7%.
As a crypto investor, I’m seeing positive movements today: Bitcoin climbed by about 1.5% and Ethereum followed suit with a 1% increase. On a weekly basis, Bitcoin has managed to gain another 1%, while Ethereum, unfortunately, saw a dip of around 2.5%.
On Sunday, Cardano continued to see gains, increasing by approximately 15% compared to its price a week earlier on August 25. This upward trend may be driven by ongoing positive news about updates, as investors in the cryptocurrency market who follow news are likely pouring funds into the ADA economy.
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2024-08-26 00:11