The US Federal Reserve has cut its key rate by 50 basis points, sparking significant interest from investors and analysts. This decision comes amid sustained economic growth despite slower job creation and a slight rise in the unemployment rate.
Market Reaction to Rate Cut
The markets saw a positive reaction to this major rate cut, with particular growth noted in the cryptocurrency sector. Investors are closely watching the Fed's next steps as the central bank continues to assess economic data and risks before making any further adjustments to interest rates.
John Bollinger's Opinion
Renowned financial analyst John Bollinger, best known for creating the Bollinger Bands trading indicator, acknowledged that such rate adjustments should be viewed as a return to normalcy rather than a simple easing of monetary policy.
Potential Consequences and Future Risks
Following the rate cut, it is logical to assume that fixing long positions should mitigate potential market declines. However, risks remain, especially amid instability in the stock markets like Nasdaq and S&P500, which have not undergone a normal correction. If investors decide to fix positions in blue chips, Bitcoin's price may significantly lower. Fed Chair Jerome Powell noted that there are currently no signs of recession. However, historically, after the start of rate cut cycles, the average maximum drawdown for the S&P 500 one year later is -20.7% during a rapid contraction cycle and -7.4% during a slow contraction cycle.
The US Fed's rate cut has opened the door for further changes in the markets, including the cryptocurrency sector. Investors and analysts will closely monitor the central bank's next moves and their impact on the economy.
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