(Kitco News) – Cryptocurrency traders have taken the Fed’s 50 bps rate cut as a signal to go risk-on as Bitcoin (BTC) bulls stampeded through the bear resistance lines at $62,000 and $63,000 and are now looking to flip $64,000 back into support.
“The crypto market rallied solidly by 3% to $2.18 trillion, gaining further momentum after the Fed's decisive rate cut,” noted Alex Kuptsikevich, senior market analyst at FxPro. “Increased risk appetite in the markets after the Fed's decision helped cryptocurrencies hit highs over the past three weeks. The crypto market has been moving within a downward corridor since mid-March, and only a surpassing of the recent $2.25 trillion peaks could change this trend.”
“Bitcoin has reached the [$63K] level. That's an impressive [20%] gain since the lows in early September, but only +8% in 7 days and less than +2% in 30 days,” he added. “The downtrend has been in place since March, and the previous peak of around $64K roughly coincides with the 200-day moving average. We assume that Bitcoin may encounter serious resistance at this level, overcoming which would clear the way up.”
BTC/USD daily chart by TradingView
As for Ethereum (ETH), the second-ranked crypto by market cap, Kuptsikevich said it has “shown a promising rebound from its 200-week average, ending the week in positive territory. From current levels above $2400, significant resistance is unlikely to be encountered until the $2800 area, near the 50-week average.”
ETH/USD weekly chart by TradingView
And it's not just cryptos that are trending higher, as stocks traded well into the green during the morning session while spot gold briefly spiked to $2,595/oz, less than $5 below yesterday’s new record high set just after Fed Chair Jerome Powell announced the rate cut.
But it wasn’t all smooth sailing, as the post-rate-cut period has been marked with volatility and whipsaws.
“The overnight price action suggests the market is divided on the full implications of the Fed’s 50bp cut,” said Yongjin Kim, CEO of Flipster. “Whipsaws were seen across nearly all asset classes during Powell’s briefing, with bonds, JPY, gold, small caps, and BTC initially showing risk-on moves, only to reverse course minutes later.”
“In recent weeks, the narrative that the 50bp cut is a ‘crisis-management move’ signaling a potential recession has gained traction, though the empirical evidence remains inconclusive,” he noted. “In reality, the Fed’s actions are reactive to changes in the underlying economy, with no direct cause-effect relationship.”
“Whether the 50bp cut turns out to be net inflationary (i.e., asset price positive) depends on the pace of the current growth slowdown,” Kim said. “Judging by last night’s market confusion, growth concerns clearly exist, and the market needs relief from them to rally. We are now firmly in ‘good news is good news’ territory.”
The ‘good news’ has indeed excited traders as multiple assets have seen new all-time highs in the wake of the rate cut announcement, but it remains to be seen if the boost in sentiment will sustain or fade after the initial euphoria.
“US stock index futures have surged higher overnight in strong moves that have taken the Dow and S&P 500 to fresh all-time highs,” said David Morrison, senior market analyst at Trade Nation. “These moves follow yesterday’s rollercoaster session.”
“Equities soared higher as the Fed’s FOMC announced a 50 basis point (bps) rate cut, its biggest one-off reduction since the Great Financial Crisis of 2008,” he noted. “Then prices reversed sharply, plunging into negative territory, before rallying a touch to close out with modest losses.”
“There was plenty of uncertainty ahead of the announcement as to whether the Fed would cut by 25 or 50 bps. Consequently, it was clear that whatever the decision, markets would swing wildly as investors adjusted to the new reality,” Morrison said. “The FOMC’s ‘Dot Plot’ showed that the majority of participants expect another 50 bps of cuts before year-end, with another 100 bps next year and 50 bps in 2026. If so, this would take the Fed Funds rate down to the 2.75-3.00% band.”
“Interestingly, the CME’s FedWatch Tool shows that market participants are betting on a further 75 bps of cuts before year-end, so there’s still a difference of opinion out there,” he highlighted. “The Fed’s statement said: ‘the committee has gained greater confidence that inflation is moving sustainably towards 2% and judges risks to achieving its employment and inflation goals are roughly in balance’. In his subsequent press conference, Fed Chair Jerome Powell seemed more relaxed than on prior outings.”
Morrison underscored that the rate cut “has boosted all risk assets this morning, and sentiment is currently strongly positive” before noting that “some will be asking why a 50 bps cut was warranted at this time, given the underlying strength of the US economy.”
“While the Unemployment Rate has ticked higher over the last twelve months, part of this is due to more people now actively looking for work, as the economy improves,” he said. “On the other hand, recent Non-Farm Payroll numbers have disappointed, casting some uncertainty over recent economic growth data. It will be interesting to see if this morning’s rally continues through the main session, or if it starts to fade into the weekend. Sentiment is fickle, and as we’ve just seen, markets can turn sharply.”
At the time of writing, Bitcoin trades at $63,133, an increase of 5.85% on the 24-hour chart.
