FED Cuts Rates by 50 Basis Points: Why It Matters
On September 18, 2024, the Federal Reserve shocked markets by cutting interest rates by 50 basis points.
This decision, the first of its kind since 2020, is part of the Fed’s strategy to recalibrate monetary policy.
For cryptocurrency investors, this rate cut may signal the start of a shift toward greater risk appetite, with Bitcoin standing to gain as a potential hedge.
The aggressive 50 basis point rate cut signals that the Fed is preparing for a potential economic slowdown.
By lowering rates, the Fed is making risk assets like Bitcoin more attractive to investors.
Historically, lower interest rates have driven investors away from traditional assets like bonds and toward alternatives, including cryptocurrencies.
2008 and 2020: 50 BPS Emergency Rate Cut
The last time the Federal Reserve cut interest rates by 50 basis points (0.5%) was on March 3, 2020.
This was an emergency rate cut in response to the economic risks posed by the emerging COVID-19 pandemic.
The cut lowered the federal funds rate to a range of 1.00% to 1.25%.
Before the March 3, 2020 emergency cut, the Federal Reserve last cut interest rates by 50 basis points on October 8, 2008 during the global financial crisis.
This was also an emergency rate cut, coordinated with other central banks worldwide, to combat the rapidly worsening financial conditions following the collapse of Lehman Brothers and the subsequent market turmoil.
This cut lowered the federal funds rate to a range of 1.50% to 1.00%.
The 2008 financial crisis prompted several such moves, making this cut part of a broader effort to stabilize the global economy.
What This Means for Bitcoin and Cryptocurrencies
With traditional investments offering lower returns in a low-interest environment, Bitcoin and other cryptocurrencies may see increased demand.
As central banks continue to lower rates, more institutional and retail investors could shift their focus to digital assets, driving up their prices.
The Fed’s decision may also have broader implications for the overall adoption of Bitcoin as a store of value.