According to Scott Garliss, Director of Business Ventures at MarketWise, the Fed's decision to cut interest rates could be a positive development for cryptocurrencies.
Garliss explains that the Fed’s current monetary policy and the potential decline in borrowing costs are key factors that could push prices of risky assets like Bitcoin and Ethereum higher in the coming months.
Garliss said many investors fail to grasp the dynamics behind central bank interest rate policies, which significantly affect asset prices. “The Fed has plenty of room to start lowering interest rates,” he said. The consensus view on Wall Street is that the Fed will cut its overnight lending rate to 3.33% from the current 5.33% over the next 18 months. The cut would make borrowing cheaper for households, businesses and asset managers, which could lead to increased investment and higher values of dollar-denominated assets, including cryptocurrencies.
Garliss noted that recent economic data supports this outlook. In mid-August, the U.S. Bureau of Labor Statistics released July consumer price index (CPI) data, showing that inflation growth fell below 3% for the first time since early 2021. Fed Chairman Jerome Powell confirmed this trend last week during a speech at the Kansas City Fed’s Annual Economic Symposium in Jackson Hole, Wyoming, and suggested that it was time to consider lowering interest rates.
Powell said inflation is slowing and price pressures are easing, thanks to the return of supply chains to normal and the increase in labor supply.
*This is not investment advice.