Traders forecast that the Federal Reserve may lower interest rates by September 2023, which will affect the cryptocurrency market.
Expectations for Fed Rate Cuts
The Federal Reserve has not changed interest rates recently, but traders are anticipating a shift by September. CME Group's FedWatch Tool indicates a 75% probability of a 0.75% rate cut by the end of the year.
Impact on Cryptocurrency Market
Historically, softer Fed policies lead to cryptocurrency rallies. Major assets like Bitcoin and Ethereum typically appreciate during periods of rate cuts, as traditional financial yields become less attractive.
DeFi Market and Liquidity
Potential rate cuts could greatly influence market liquidity and activity in the cryptocurrency space. In the past, such moves have led to increases in total value locked (TVL) in DeFi protocols. The anticipation of rate reductions often aligns institutional positioning and influences broader financial strategies.
The expected Federal Reserve rate cuts may drive increased liquidity and asset prices in cryptocurrency markets, including a rise in total value locked in DeFi.
