Markets
Therefore, we can expect the crypto markets to continue the uptrend
The cryptocurrency world has shown signs of recovery after a brutal crypto winter. Many digital currencies have reached or are approaching all-time highs, indicating their promising future prospects.
While this may seem unrelated, central banks around the world have started cutting interest rates, which could have huge implications for cryptocurrency markets. This is a link that creates an attractive opportunity for financiers, as interest rate reductions by central banks will inject new money into the economy and therefore lead to a potential boom in the economy. cryptocurrencies.
Recently, the European Central Bank (ECB), the central banks of Canada, Switzerland and Sweden, among others, reduced their reference interest rates. Although there is hope that the same will happen with the US Federal Reserve by the end of the year, there is still no action in this regard. This change is significant because the US economy is still the largest in the world and therefore this act could promote better risk-on conditions for assets like cryptocurrencies.
Interest rates play an important role in determining investor behavior in the crypto market. Cryptocurrencies, which are notorious for being risky assets, thrive in conditions of high liquidity with low borrowing costs, where funds move freely between asset classes, including cryptocurrencies.
We’ve been here before
In 2020, central banks cut interest rates to near zero as part of their response to the economic fallout from the Covid-19 crisis. In November 2021 alone, Bitcoin jumped from $7,000 to nearly $69,000, helping to increase the cryptocurrency’s total capitalization from $190 billion to more than $2 trillion.
While not as drastic as previous ones, the round of interest rate cuts is expected to be largely favorable for crypto markets. Amid possible speculation, investors should remain disciplined by focusing on established cryptocurrencies such as Bitcoin It is Ethereumwhose durability and reliability are proven.
Being wary of the temptations arising from speculative instruments will help guide you in the next step.
