The cryptocurrency market has been on a downward trend since yesterday afternoon, especially with a significant drop in the price of meme coins. The small-cap digital asset index experienced its largest decline in two weeks. In response to this, Stefan von Haenisch, the digital asset trading supervisor, pointed out that the prospect of a reduced number of interest rate cuts by the Federal Reserve is impacting the entire cryptocurrency field.
With the outlook for loose monetary policy in the United States becoming more severe, Federal Reserve officials are currently considering reducing the magnitude of interest rate cuts for this year. Against this backdrop, the US dollar index broke through the 105 mark yesterday and the yield on 10-year US Treasury bonds also rose. This economic trend seems to be impacting the investment enthusiasm in the cryptocurrency market.
The momentum of meme coins and other cryptocurrencies has stagnated. Since yesterday afternoon, the cryptocurrency market suddenly declined, with Bitcoin falling below $67,000 before the deadline, experiencing a drop of over 5% in the past 24 hours. The market of meme coins such as mfer, Pepe, WIF (dogwifhat), and Bonk, which were highly sought after in the market a few days ago, also suffered significant declines, with all of them dropping over 10% in the past 24 hours. This led to the small-cap digital asset index experiencing its largest decline in two weeks.
In response to this, Stefan von Haenisch, the trading supervisor of the digital asset company OSL Group in Singapore, stated that the decline in cryptocurrencies is influenced by the pessimistic expectations of the Federal Reserve’s interest rate outlook. Since reaching a peak of $73,737.94 in mid-March, Bitcoin has fallen by over 9% until the deadline. At the same time, the funds flowing into US Bitcoin spot ETFs have started to cool down. The net inflow scale from March 26th to 28th decreased from $417 million to $240 million, and further decreased to $180 million. Although the market had high hopes for the catalyst brought by the halving this month, the short- to medium-term performance of cryptocurrencies such as Bitcoin is under pressure due to the above factors.
According to CNN, Raphael Bostic, the President of the Federal Reserve Bank of Atlanta, recently expressed a cautious view and suggested that the Fed should only cut interest rates once this year. He explained that due to the “economic performance consistently exceeding expectations, demonstrating unexpected resilience and vitality,” he has reassessed his view of the economic outlook.
In addition, considering the higher-than-expected inflation in the United States, stable growth in the job market, and the strong upward trend in the stock market, some economists and professional investors believe that even if the Fed cuts interest rates before the end of the year, the number of rate cuts may be lower than the three times currently expected by Fed officials and the market, at most once, or even no cuts at all. Kolanovic, the global market strategist at JPMorgan, pointed out that the continuous rise in stocks and the cryptocurrency market has added trillions of dollars to investors’ wealth, making it not easy to control inflation under such circumstances. He mentioned, “Cutting interest rates once, that’s it. I’m not even sure about that this time.”
Source: SoSo Value