As a seasoned researcher with over two decades of experience in the volatile world of finance and cryptocurrencies, I can’t help but feel a sense of deja vu as I witness the current surge in meme coins and large-caps like Bitcoin and Ethereum following the Federal Reserve’s interest rate cut. This is not the first time such a phenomenon has occurred, and if history serves as any guide, we might be in for another wild ride.
Following the announcement by the Federal Open Market Committee that they reduced interest rates for the first time since 2020, with indications of further reductions on the horizon, cryptocurrencies experienced an increase in value.
After the recent decision, meme coins such as Neiro (NEIRO), Billy (BILLY), and Baby Doge Coin (BABYDOGE) emerged as some of the top gainers.
Neiro experienced an impressive surge of more than 120%, reaching a new peak of $0.00084. This is notably higher than the record low this month of $0.00036. During trading, the volume increased substantially to approximately $794 million, and its market capitalization rose to around $354 million.
Billy, another well-known meme token among small-cap stocks, surged 60% to reach $0.043, elevating its market value to more than $32 million. Meanwhile, Baby Doge Coin, which saw an upward trend following its listing on Binance on Monday, has maintained this rise in a bustling trading environment.
Additionally, significant cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) saw a surge, reaching $60,500 and $2,300 respectively. Meanwhile, U.S. equities also experienced growth, with the Nasdaq 100, Dow Jones, and S&P 500 indices approaching their record highs.
Fed slashed rates as the economy cools
According to their latest ruling, the Federal Open Market Committee reduced interest rates by half a percentage point, expressing concerns that the job market was worsening at a quicker pace than anticipated. This action was in line with the forecasts of the majority of Polymarket users, but Senator Elizabeth Warren advocated for a reduction of three-quarters of a percentage point instead.
In August, the unemployment rate continued to exceed 4%, while U.S. inflation has taken a dip. The most recent report reveals that the headline consumer price index dropped to 2.5% in August – its lowest point since 2021. Economists predict a sequence of 0.50% interest rate reductions at the last two meetings of the year. The FOMC statement indicated this possibility.
The Committee now feels more assured that inflation will steadily approach a rate of 2%, and they believe that the chances of meeting their objectives for both employment and inflation are about equal.
2021 saw a remarkable surge in the cryptocurrency market following the latest Federal Reserve rate reduction, peaking at an unprecedented high for Bitcoin at around $68,000 that year.
📣 Flash Update 📣
🇺🇸 The Federal Reserve has reduced interest rates by 0.5% (or 50 basis points).
This initial rate cut signals the beginning of a potential monetary expansion, though the Fed treads carefully. However, I anticipate further rate cuts of 50 BPS each in November and December.
Buckle up for potential gains in the SP500 and Bitcoin prices in the last quarter of 2024! #FOMC
— Seth (@seth_fin) September 18, 2024
On Friday, we’ll be waiting for the Bank of Japan (BoJ)’s announcement about their upcoming decision. Most experts predict the BoJ will keep interest rates as they are, but there’s also a chance they might raise them, similar to what happened during their last meeting.
If the Bank of Japan increases its interest rates while the Federal Reserve decreases theirs, it could decrease the difference in interest rates between the two countries, potentially ending a long-standing carry trade strategy. This shift could have been behind the “crypto Black Monday” event, which saw Bitcoin plummet to one of its lowest points in months, as this divergence in monetary policy was previously significant enough to cause such market turbulence.
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2024-09-18 21:28