The U.S. Federal Reserve (Fed) held a closed-door meeting on April 7 to discuss the possibility of cutting interest rates. If a rate cut is implemented, it could serve as a major catalyst for the crypto market by encouraging investment in riskier assets and weakening the U.S. dollar.
Mounting Pressure on the Fed Amid Market Turmoil
Amid growing uncertainty in global markets triggered by former President Donald Trump’s tariff remarks, the Fed quietly announced an unscheduled meeting at 11:30 AM on April 7 (local time), equivalent to 10:30 PM in Vietnam.
The official statement from the Fed read: “A closed meeting of the Board of Governors of the Federal Reserve System will be held to review and determine the advance and discount rates to be charged by the Federal Reserve Banks.”
This announcement came just after financial markets witnessed a broad sell-off, affecting both traditional and crypto assets. When rumors of a 90-day delay in proposed tariffs emerged, markets quickly bounced back—but the rebound was short-lived as the White House denied those rumors, causing another downturn.
Why a Rate Cut Might Be on the Table
High interest rates make fixed-income assets like bonds more attractive, drawing capital away from risk assets such as stocks and cryptocurrencies. Conversely, lower rates typically increase liquidity, encouraging capital to flow into higher-risk, higher-growth sectors—including crypto.
Historically, rate cuts—especially the Zero Interest Rate Policy (ZIRP) following the 2008 financial crisis—have been closely associated with strong market recoveries.
Today, many investors believe the U.S. economy is on the brink of a recession. Against this backdrop, any signal from the Fed indicating a policy shift could spark renewed market optimism, even though the Federal Open Market Committee (FOMC) has recently downplayed such prospects.
Diverging Views: Powell vs. Fink
Fed Chair Jerome Powell has remained cautious, suggesting it’s not yet time to lower rates. Still, he faces growing pressure from investors, who are pricing in multiple rate cuts in 2025.
In contrast, BlackRock CEO Larry Fink, despite his generally pro-crypto stance, holds a more pessimistic view. In a recent televised interview, Fink revealed that many American CEOs believe the U.S. economy is already in recession and that the country is no longer the “global stabilizer” it once was.
He bluntly stated: “The odds of seeing 4–5 rate cuts this year are zero—in fact, rates could go even higher.”
Are Lower Rates Always Good for Crypto?
While lower interest rates often lead to a weaker U.S. dollar—a potential boon for assets like Bitcoin—they do not automatically translate to crypto market rallies. The Fed does not factor crypto into its core policy decisions, at least not for now.
Still, with looser monetary conditions and more abundant liquidity, many analysts argue that risk assets, including crypto, stand to benefit. History suggests that rate-cutting cycles often align with broader market expansions, such as the post-2008 recovery.
Lower borrowing costs mean easier access to capital, which can stimulate demand for high-risk, high-reward investments like cryptocurrencies.
What About Institutional Capital?
Perhaps the most important signal to watch is institutional sentiment. In a high-rate environment, risk-averse institutional players tend to avoid volatile assets like crypto. But if the Fed pivots toward easing, investor sentiment could shift quickly.
In a low-interest-rate landscape, institutional investors may reconsider allocating funds to alternative assets in search of better yields. Should this capital flow into crypto, it could mark the beginning of a sustained market rebound.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Readers should conduct their own research before making any financial decisions. We are not responsible for any investment actions taken based on the content of this article.
