Bitcoin Cash (CRYPTO: BCH) is trading down 2.3% at $307.88 on Wednesday morning ahead of the highly anticipated announcement of the Federal Reserve on its interest rate policy.
The drop comes as investors weigh how a potential Fed rate cut could impact the broader economic and financial outlook, including the Cryptocurrency market.
What happened
The Federal Reserve is widely expected to announce its first rate cut in the current monetary policy cycle later today. While such moves are typically viewed favorably for risk assets like cryptocurrencies, Bitcoin Cash is facing downward pressure in light of unexpectedly strong economic data, which has raised questions about how aggressive the Fed will be in cutting rates.
The Atlanta Federal Reserve’s GDPNow model recently revised its estimate for third-quarter real GDP growth upward from 2.5% to 3%. The revision came on the back of better-than-expected August retail sales and industrial production reports, which signaled that the economy is performing better than initially thought.
Why is it important?
While many market participants had expected a rate cut to boost the economy and risk assets, including cryptocurrencies, the strong economic data has raised uncertainty about how “dovish” the Fed’s stance will be. The expected strong growth signals raised doubts that the economy may not need as much monetary stimulus as previously thought, leading to speculation that the rate cut could be smaller or less impactful than initially anticipated.
The resilience of the US economy reduces the likelihood of even more aggressive cuts, a development that could impact speculative assets like Bitcoin Cash, which tend to benefit from less restrictive monetary conditions. Moreover, strong economic indicators could support the US dollar, making cryptocurrencies less attractive as an alternative investment.
Image by tom bark on Pixabay
You can also read: 5 Key Takeaways From the Fed’s Next Rate Cut: What to Expect
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