Bitcoin fluctuates after Fed cuts for first time in four years

BITCOIN was little changed after the US Federal Reserve reduced borrowing rates for the first time since the Covid pandemic paralysed the economy more than four years ago and helped cryptocurrencies break into the mainstream.

The US central bank lowered its benchmark interest rate by a half percentage point. Projections released following their two-day meeting showed a narrow majority, 10 of 19 officials, favoured lowering rates by at least an additional half-point over their two remaining 2024 meetings.

The original digital asset initially gained about 2 per cent before erasing the increase and trading at around US$60,000, while smaller tokens mostly declined. Lower rates usually help to spur an increase in demand for riskier assets.

“It could signal in theory that the Fed is cutting 50 (basis points) because they are worried about something,” said Spencer Hallarn, global head of over-the-counter trading at crypto investment firm GSR. “If they think we are on the brink of recession then maybe feel more urgent to cut quickly.”

Bitcoin has been trading within a relatively narrow range since setting a record high of almost US$74,000 in March.

“Knee jerk reaction higher as market gets some relief after weeks of flip flopping between 25 and 50 bps,” said Karim Dandashy, over-the-counter trader at Flowdesk US.

Hedge fund manager Anthony Scaramucci said earlier Wednesday that he expected Bitcoin to reach new record highs fuelled by a combination of the interest-rate cut and more regulatory clarity on the crypto industry from the US. BLOOMBERG