TL;DR
A potential interest rate cut by the U.S. Federal Reserve could boost the crypto market, possibly pushing BTC toward a new all-time high.Some experts argue that the positive impact of the effort might be temporary, suggesting that raising the benchmark could be more beneficial for the economy.The Potential Pivot
The US Federal Reserve (the de facto central bank of the United States of America) is expected to reduce the interest rates during its next FOMC meeting scheduled for September 18. Recall that it lifted the benchmark 11 consecutive times between March 2022 and July 2023 to the current level of 5.25%-5.50%.
This might have a significant impact on financial markets, including the crypto sector. After all, a potential pivot will make money-borrowing cheaper, which, in turn, could boost investors’ interest in risk-on assets such as cryptocurrencies.
The popular AI-powered chatbot – ChatGPT – also claimed that lowering the interest rates in the US may propel a bull run for digital assets, particularly Bitcoin (BTC). In fact, it estimated that the price of the primary cryptocurrency could reach an all-time high of $100,000 following the effort:
“Lower interest rates often lead to improved sentiment toward riskier assets like Bitcoin. If investors expect easier monetary conditions, they might be more inclined to allocate capital to Bitcoin, potentially driving its price higher.”
However, ChatGPT warned that this outcome is not guaranteed and will depend on various other factors. It assumed that a pivot from the Fed could weaken the US dollar, which in turn might make BTC more attractive as an alternative store of value.
Overall market conditions, regulatory developments, macroeconomic trends, and the level of institutional and retail demand for cryptocurrencies would also play a key role in an eventual ATH for the asset, the chatbot added.
Just a Short-Term Effect?
Other prominent industry participants, including BitMEX’s co-founder Arthur Hayes, believe a pivot from the Federal Reserve might only benefit BTC and the altcoins in the short run.
He compared the effect of such a move to the strong (yet brief) energy boost that sugary foods provide. Moreover, he thinks an interest hike would be more beneficial for the economy:
“The Fed is reaching for the rate cut sugar high before hunger arrives. From a purely economic perspective, the Fed should be raising, not cutting, rates.”