Fed’s Interest Rate Pause
According to experts, the United States Federal Reserve (Fed) decision to halt further interest rate hikes is expected to bolster the crypto industry and its related stocks. During a recent interview, Jeffrey Rosenberg, a top-level executive at BlackRock funds, stated that the Fed’s decision to halt rate increases is a “green light” for investors.
On-chain data shows that the S&P 500 index rose 1.37% due to the recent announcement. Following the news, companies such as Coinbase and MicroStrategy saw significant increases in stock value, rising by 7.8% and 5%, respectively.
Furthermore, Marathon Digital, a Bitcoin mining company, saw a 12.6% increase in stock value. This positive sentiment boosted traditional stock markets and significantly impacted specific sectors such as cryptocurrency.
Positives For The Crypto Industry
Reacting to the Fed’s statement, Henrik Andersson, head investment officer at Apollo Crypto, also believes that the central bank’s decision to pause will significantly benefit cryptocurrencies and related stocks. He added that the positive effect of the pause will be significantly higher if top players such as BlackRock and Fidelity launch their Bitcoin ETFs.
Andersson believes this move may encourage other traditional financial institutions to enter the crypto market. Blockchain-based stocks recently saw an unprecedented increase in investment, with CoinShares reporting up to $126 million in inflows in the last week.
CoinShares’ head of research, James Butterfill, noted that investment products tied to digital assets have seen a consistent influx of funds for the eleventh consecutive week, representing a weekly gain of $43 million. The increasing investment in blockchain equities indicates a growing interest in this sector among investors.
Furthermore, observers believe the trend reflects a greater trust in digital assets, indicating a shift in the traditional financial landscape toward embracing crypto-related opportunities.
A Possible Bullish Momentum
According to an analyst at CMC Markets, Tina Teng, the Fed’s decision to halt rate increases will fuel increased interest in crypto-related products. Teng sees a resurgence of bullish trends similar to those experienced during the previous rate-cutting cycles.
She expects this enthusiasm to grow, especially as institutional interest surges amid the upcoming spot Bitcoin exchange-traded fund decisions, which are expected as early as January 2024. However, Andersson presented a contrasting viewpoint, stating that lower interest rates may increase enthusiasm in the crypto market and reduce the appeal of tokenizing real-world assets.
He added that decentralized finance (DeFi) yields could become more appealing to investors in a low-rate scenario. Andersson referenced the evolving landscape in which DeFi offers yields of up to 10%, a significant contrast to declining traditional profits.
Andersson noted the widespread interest in tokenizing treasuries but emphasized the shift toward DeFi due to the potential for higher returns in a low-rate environment. Nevertheless, Teng and Andersson see the upcoming Bitcoin halving in April 2024 as a pivotal event that could stimulate growth across the broad crypto market.