Traders believe that Jerome Powell, chairman of the US Federal Reserve (Fed), will reduce interest rates in June this year to 45%. There are many reasons to believe that the Fed cut interest rates and that this could have a potential impact on Bitcoin (BTC).
This is quite unexpected news for many who are at the peak of the stock market's all-time high. Trader saw the S&P500 index grow 4.6% in February - the best month since 2015.
However, Powell and Fed believe the economy is on the brink of another recession. Lowering interest rates may delay such a bad event of the economy, paving the way for a softer landing. Interest rate cuts are likely in the middle of this year.
Interest rates are the most basic tool that the Fed uses to regulate economic growth. Lowering interest rates makes borrowing costs cheaper, helping create greater liquidity for the market.
Conversely, if the Fed raises interest rates, the cost of lending will be higher and thus limiting the amount of money poured into markets. Once the liquidity decreases, the economy will slow down, and Bitcoin will more or less be affected.
However, while the economy is in a difficult situation, the Fed views these deadly weaknesses as a concern. For example, the unemployment rate has increased this year, pre-pandemic corona can cause fear to spread and squeeze spending, increasing savings.
These events have sparked fears about the upcoming recession of the economy. Therefore, to maintain growth and stability, interest rates are expected to be cut.
Anyway, the decision to lower interest rates will probably help push Bitcoin prices up. Lowering interest rates is a sign of weakening economy. Because Bitcoin is considered a "safe" asset, it will benefit from this weakness.
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According to Coin68 / BeInCrypto
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