Bitcoin ($BTC) has surged past $62,000 following a key decision by the US Federal Reserve to cut interest rates by 50 basis points.
This move was made to support the economy and reduce the risks of a potential recession.
The rate cut has not only boosted Bitcoin but also caused a rally across the cryptocurrency market, lifting several altcoins and riskier assets.
Many market analysts believe this could mark the beginning of a more significant rally for Bitcoin.
Lower interest rates tend to push investors toward assets like Bitcoin, often seen as a hedge against inflation and economic uncertainty.
The Federal Reserve’s decision to cut interest rates by 50 basis points is seen as a bold move during uncertain economic times.
This aggressive reduction has brought the current interest rates down to between 4.75% and 5.00%. The decision comes as the US economy faces rising unemployment and inflation pressures.
In July 2024, the unemployment rate in the US hit 4.2%, its highest level since October 2021. This rise triggered a recession warning known as the “Sahm Rule”, which signals potential economic trouble when unemployment increases by 0.5 percentage points within a year.
Additionally, the US added just 114,000 jobs in July, far below the 185,000 that economists expected, while inflation remains above the Federal Reserve’s target at 2.5%.
Some financial experts believe the rate cut was necessary to help prevent a recession, while others worry that it may create fears of economic instability, as larger cuts like this often occur before downturns.
The impact of the rate cut on traditional financial markets is yet to be fully felt. Typically, lower interest rates influence stock prices and other high-risk investments.
But for now, Bitcoin has responded positively, climbing to $62,096 with a 2.29% increase in 24 hours and a 6.20% gain over the past week.
Bitcoin eyes further growth
Bitcoin’s recent rise above $62,000 is an important breakthrough, as the cryptocurrency has been consolidating near the $60,000 mark for a while. Many traders see this price point as a psychological milestone.
Analysts believe that if Bitcoin can break past $63,000, its next major resistance level, it could lead to even greater price gains.
Technical indicators, such as Bollinger Bands, show increased volatility, which suggests that while some investors may take profits in the short term, the broader trend remains positive.
Bitcoin has strong support at $60,100, which has been tested multiple times and held firm, adding confidence to the market.
The market is also seeing higher trading volumes, a sign that institutional investors are showing growing interest in Bitcoin.
“Bitcoin is slowly eating its way through the resistance level. Above $62,500, things will look a lot more constructive, and stops above $65,000 won’t be safe anymore. Going to be an interesting end to September”, said a well-known trader, Jelle, on X.
Altcoins rally alongside Bitcoin
Bitcoin’s surge has sparked a broader rally in the cryptocurrency market, with several major altcoins also seeing gains. Ethereum ($ETH), the second-largest cryptocurrency by market cap, rose above $2,400, showing a 4.94% increase in the past 24 hours.
Solana ($SOL) also experienced a 6.03% rise, reaching $138.65. Other altcoins like $XRP and Shiba Inu ($SHIB) have also seen price increases, with $XRP up 1.20% to $0.59 and $SHIB climbing 7.85% to $0.00001427.
Despite the upbeat performance of Bitcoin and altcoins, some in the market remain cautious.
Co-founder of BitMEX, Arthur Hayes, warned that while the Federal Reserve’s rate cut may have caused Bitcoin’s rise, it could lead to increased inflation over the long term.
Hayes also noted that the full impact of the rate cut might not be felt until the end of the week, once traditional markets have had time to react.
Looking ahead, traders are also keeping an eye on the Bank of Japan’s upcoming decision on interest rates, which could affect Bitcoin’s performance further.
At the same time, the US Dollar Index (DXY) saw fluctuations, initially rising but then losing gains.
“Sitting at the edge of support. Breakdown can result in a sharp move towards 96”, said trader Aksel Kibar on X.
Overall, while there is optimism in the cryptocurrency market, concerns about the long-term sustainability of the rally persist.
Analysts at Presto Research have pointed out that broader economic uncertainties and regulatory challenges could still impact the performance of digital assets.
The next few months will be critical in determining whether Bitcoin can maintain its upward momentum or if larger economic factors will slow its progress.
