Crypto Market Rises After Fed Announces Three Rate Cuts in 2024

The crypto market is already recovering from a drop earlier this week. This surge may be fueled by the latest prospects for interest rate cuts from the U.S. Fed.

The U.S. central bank held its December meeting of the Federal Open Market Committee (FOMC) on December 13. In a generally expected move, Fed officials left interest rates unchanged at 5.5 percent.

Interest Rates Remain Unchanged

However, with inflation falling, forecasts for 2024 were more optimistic. There was a proposal for three rate cuts in 2024, which spurred growth in both the crypto and U.S. stock markets.

The macroeconomic newsletter The Kobeissi Letter commented that this is the first significant mention of rate cuts in 2024, adding that, however, markets currently predict up to six rate cuts in 2024 and are much more optimistic than the Fed.

Speaking to reporters after the meeting, Fed Chairman Jerome Powell stated that inflation has fallen from its peak levels without a significant increase in unemployment, and that this is very good news. He added that the Fed is likely at or near the highest rates for this cycle.

David Russell, head of global market strategy at TradeStation, noted that there has been a significant change in language indicating that policymakers see less need for aggressive tightening.

Inflation peaked at 9.1 percent in June 2022. However, year-on-year inflation fell to just 3.1 percent in November. Fed officials now predict it will fall to 2.4 percent next year and 2.1 percent in 2025.

Moreover, central bank officials predict GDP growth of 1.4 percent next year and an unemployment rate of just 4.1 percent.

Investors are now ready for a ‘Santa Claus Rally’, commented Gina Bolvin, president of Bolvin Wealth Management Group.

Crypto Markets Bounce Back

U.S. exchanges were not the only ones to rise after the positive news. The market capitalization of the crypto market jumped 5 percent on the day, reaching $1.68 trillion.

Bitcoin is trading for just under $43,000 at the time of writing, after a 4.2 percent increase in the last 24 hours. A rise above $44,000 is also very likely if the momentum continues.

Meanwhile, Ethereum rose 4.9 percent, reaching $2,280.

Altcoins saw even greater increases, with double-digit gains for Solana, Cardano, Avalanche, and Polkadot.