Fed pause is a ‘green light’ for investors; here’s what it means for crypto

A decision from the United States Fed to pause and possibly lower interest rates next year will likely serve as a “positive boost” for cryptocurrencies and crypto stocks.

In a Dec. 13 interview with Bloomberg, Blackrock fund manager Jeffrey Rosenberg described the Fed’s rate pause — and its hint at rate cuts next year — as a “green light” for investors, with the S&P 500 rallying 1.37% on the decision.

Crypto stocks have witnessed significant gains on the back of the announcement too, with shares of Coinbase (COIN) and MicroStrategy (MSTR) respectively spiking 7.8% and 5% on the day, while Bitcoin miner Marathon Digital (MARA) jumped 12.6%.

Henrik Andersson, chief investment officer at investment fund Apollo Crypto told Cointelegraph that he expects today’s pause and the expectation of lowered interest rates in the coming year to be a “positive boost” for cryptocurrencies and crypto-related stocks, adding:

Notably, blockchain equities recently experienced their largest weekly inflows on record, with a staggering $126 million flowing into crypto-related stocks, according to a Dec. 11 report from CoinShares.

CoinShares’ head of research, James Butterfill, also found that digital asset investment products experienced their 11th straight week of inflows, posting another weekly gain of $43 million.

Tina Teng, market analyst at CMC Markets, told Cointelegraph the Fed’s rate pause would undoubtedly increase market enthusiasm for crypto products.

Related: Bitcoin to surge to $80K as stablecoins overtake Visa in 2024: Bitwise

Teng said investors can expect to see similar bullish trends not seen since previous rate-cute cycles, something that will be amplified by institutional interest in pending spot Bitcoin ETFs, which are currently slated for a decision in early January.

However, Andersson added that a side effect of lower interest rates could be the cooling of the real-world asset (RWA) tokenization narrative, with expected increases in DeFi yields becoming more attractive to investors in a low-rate environment.

“A lot of the interest so far has been in tokenizing treasuries. We now see an environment where we can generate in excess of 10% yield in DeFi while traditional yields are heading the opposite direction,” he added.

Like many market commentators, Teng and Andersson both looked to the upcoming Bitcoin halving — currently slated for April next year — as a major catalyst for overall crypto market growth in 2024.

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