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This Wednesday the last meeting of the year of the Federal Open Market Committee (FOMC) concludes with an almost certain interest rate cut. Wall Street analysts in consensus expect the price of money to fall for the third consecutive time and this time by 0.25%. Expectations from the crypto market are also enormous.
As usual, after two days of meeting, the Federal Reserve Committee (Fed) debates possible decisions related to monetary policy. After that, he will make the official announcement and, finally, the president of the Fed, Jerome Powell, will offer his usual press conference. The latter is of vital importance, since analysts can make interpretations of the official.
Beyond the decision of this meeting, financial markets in general are looking for clues to understand the monetary policy of 2025. At this point, the projections for next year are of great interest, considering that it is a period of entry of a new government administration in the US. In any case, President Trump will surely push for the rate to be taken to zero as soon as possible.
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However, the Fed has its own agenda and cuts or waits will surely be made depending on economic data. All of this is of enormous importance for investors in the crypto market, given that the interest rate directly affects the flow of capital towards risk assets.
According to a recent survey, the interest rate in the US will approach 3% in 2025. Source: Bloomberg
The crypto market with positive performance prior to the FOMC decision
As shown in the graph above, expectations are that the interest rate will drop significantly in 2025. This becomes another reason for optimistic sentiment in the Cryptocurrency sector. These digital assets already have enormous upside potential with Trump’s mere coming to power.
The tycoon promised an ideal environment for Bitcoin and the rest of the altcoins, which includes adding them to the country’s strategic reserves. In that sense, the friendly policies of the new government, added to the continuation of monetary easing, can guarantee a strong bull run for cryptocurrencies.
However, not everyone is sure that the interest rate can approach 3% in the short term. Over the past few months, inflation has been tough on falling toward the Fed’s 2% target. This implies that the central bank could take its rate cut slowly.
In any case, unless a truly disturbing scenario occurs for the global economy, the crypto market maintains its bullish outlook. As Fed officials prepare to announce the new cut, market reaction is mixed. The S&P500 benchmark index closed the day on Tuesday with red numbers of -0.39%.
On the other hand, the price of BTC experiences a sharp decline of -2.37% in 24 hours. Meanwhile, Bitcoin spot ETFs maintained their streak of 15 consecutive days with positive flows. This Tuesday they closed with inflows of $493.9 million, according to Farside Investors.
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