The Federal Reserve shook the markets with its latest interest rate cut during the Federal Open Market Committee (FOMC) meeting on September 18. By reducing rates by 50 basis points, the Fed brought the federal funds rate down to a range of 4.75% to 5.00%, sparking a renewed appetite for risky assets. This decision has had a profound impact on Bitcoin, Ethereum, and other macro assets, leading to significant market fluctuations.
Yen Drops Amid Rate Cut
Following the rate cut announcement, the cryptocurrency market saw a swift recovery. Ethereum (ETH) surged by as much as 14%, while feline-themed meme coins rose by 40% on a weekly basis, signaling a renewed interest in risk-taking among investors. Bitcoin (BTC), meanwhile, posted a more modest gain of over 5%, although its market dominance dipped below 58%, suggesting that other digital assets are also entering a bullish phase.
Altcoins Surge as DXY Climbs
The U.S. Dollar Index (DXY) increased by 0.36%, surpassing the critical 101 level after the Fed’s decision. At the same time, the value of the U.S. dollar rose against the Japanese yen, with the USD/JPY pair moving from 141 to 143.5 after the rate announcement. The weakening yen has further supported demand for riskier assets, including cryptocurrencies.
Gold, Stocks, and Bitcoin All Climb
The positive impact of the Fed’s rate cut extended beyond cryptocurrencies. Oil and gold both saw gains, with oil prices rising 2% amid geopolitical tensions in the Middle East. Gold, a traditional safe haven, also appreciated as investor demand grew. Notably, Nvidia (NVDA) stocks increased by nearly 2%, while the S&P 500 index climbed by more than 1%. These indicators highlight the growing appetite for risky assets, supported by the Fed’s easing policy.
The vibrant crypto market is also reflected in rising demand for Bitcoin and Ether-based ETFs. Between September 19-20, Ether-based ETFs saw an inflow of $8.1 million, while Bitcoin ETFs attracted a much larger $250.3 million. This trend signals that institutional investors are increasingly following the crypto market’s upward momentum. Smaller-cap cryptocurrencies emerged as the biggest winners after the rate cut, outperforming large-cap and mid-cap coins, with many reaching new highs against Bitcoin.
Yen Weakens Further
Despite the positive developments in crypto and stock markets, the Japanese yen continues to weaken. The Bank of Japan (BOJ) opted to keep interest rates unchanged, a decision that, combined with the Fed’s rate cut, led to a further decline in the yen’s value. The yen fell to 144.16 against the dollar. While Japanese markets were closed for a holiday, global investors remain focused on the broader implications of the Fed’s policy shift and potential future rate cuts.
The Fed’s decision to lower interest rates has boosted demand for risky assets, particularly cryptocurrencies like Bitcoin and Ethereum. However, the weakening yen and macroeconomic uncertainties suggest that volatility remains high. Investors are advised to stay cautious and monitor ongoing developments in global markets.
