Brace Yourself for Cryptocurrency Market Fluctuations: Investors Tense as Possible Interest Rate Reductions by the Federal Reserve Approach
The Federal Reserve (Fed) is expected to cut interest rates on September 17, according to the FedWatch Tool on the CME Group website. At the time of writing, the FedWatch Tool shows a 96.1% probability of the Fed cutting interest rates. This probability has remained over 95% in the past week, reflecting market consensus for a Fed rate cut soon.
The expected interest rate range after the cut is 4.00%-4.25%. This is a complete flip from the probabilities seen last week, with the Fed now having a 0% probability of choosing to increase interest rates at this time.
Lower interest rates are expected to encourage more risk-taking in the crypto and stock markets. In the crypto sphere, Dogecoin open interest has risen over 97% in the past week, a significant increase that could be indicative of increased investor interest. Interestingly, the last time Dogecoin open interest hit a new all-time high (ATH), it was followed by a significant increase in its price.
However, it's important to note that an interest rate cut is not a guarantee of market soaring. Analysts advise watching how the market unfolds before investing, as volatility will be quite high in the first few hours following the interest rate announcement. The effect of an interest rate cut is often felt right after the announcement.
Meanwhile, Coinbase's XRP reserves have declined by 90%, indicating potential investor accumulation. This could suggest that investors are positioning themselves for a potential increase in the price of XRP.
On September 17, the CME FedWatch Tool indicated the Federal Reserve as the favored institution expected to cut interest rates, with probabilities for a 25 basis point rate cut around 89% to over 90% depending on the source. This probability is very close to the 97.6% that was recorded and reported by NewsBTC a little over a week ago.
It's important to remember that while a rate cut could potentially boost the crypto market, the Fed's decision on interest rates will likely have a significant impact on the crypto and broader finance community. However, if the Fed chooses to keep interest rates the same, it wouldn't be as bullish for the markets, but wouldn't exactly be bearish either. The sentiment around a possible rate hike remains at 0% probability.
In conclusion, as we approach September 17, the crypto and finance community awaits the Fed's decision on interest rates with bated breath. The potential impact on the crypto market is significant, and investors are advised to stay informed and cautious.
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