Bitcoin, Ethereum, and XRP are poised for a near-term recovery as investors eagerly await the announcement of interest rate cuts by the US Federal Reserve.
Bitcoin, Ethereum, XRP Set for a Near-Term Bounce as Attention Turns to Rate Cuts
Market Expectations and Recent Volatility
Crypto markets experienced high volatility following U.S. tariff announcements, with major tokens initially surging and then slumping. Investors moved large volumes of Bitcoin, ‘surging and then slumping’ , and XRP into exchanges, indicating a readiness to sell amid economic uncertainty.
Bitcoin is a decentralized digital currency that allows for peer-to-peer transactions without the need for intermediaries.
It was created in 2009 by an anonymous individual or group using the pseudonym Satoshi Nakamoto.
Bitcoin uses cryptography to secure and verify transactions, making it a secure and transparent way to transfer value.
As of 2022, there are over 18 million Bitcoins in circulation, with a total market capitalization of over $1 trillion.
Economic Data and Rate Cuts
Markets are anticipating the U.S. non-farm payroll report, which could influence Federal Reserve rate cut expectations and impact crypto prices. The report is scheduled for release later this Friday, offering insight into economic health. A higher-than-expected report can boost stocks and the dollar, signaling growth, while a weak report may spark sell-offs and lower yields.
A rate cut, also known as a monetary policy easing, is an action taken by a central bank to lower its short-term interest rates.
This decision aims to stimulate economic growth by increasing borrowing and spending.
When interest rates are reduced, it becomes cheaper for consumers and businesses to borrow money, which can boost consumption and investment.
Rate cuts can also influence the exchange rate, making exports more competitive.
Central banks use rate cuts as a tool to combat recession, slow down inflation, or stabilize financial markets.
Market Sentiment and Outlook
Data shows markets are pricing in four rate cuts in 2025 — 0.25 bps each in June, July, September, and December. Investors are bracing for signs of softness in the U.S. labor market, with a weaker-than-expected print potentially bolstering the case for further Fed rate cuts this year.
The Impact of Rate Cuts on Bitcoin
Bitcoin tends to react positively to rate cuts, as lower rates reduce the appeal of traditional investments like bonds, driving investors toward alternatives like BTC. A weaker dollar can also enhance BTC‘s value as a hedge against inflation or currency devaluation. With positioning now light and risk assets largely oversold, the stage may be set for a near-term bounce.
