There Could Be an Interest Rate Cut on the Horizon. Here's How That Might Affect Cryptocurrency Prices.
Will lower interest rates once again lead to higher crypto prices?
The U.S. Federal Reserve is facing heavy pressure to cut interest rates. President Donald Trump recently warned that Fed Chairman Jerome Powell's job could be at risk if he doesn't cut rates fast.
But let's set aside all the political undertones and deal-making calculations, and focus on the overarching questions: What happens to cryptocurrency prices if there is a rate cut? And which cryptocurrencies would become most attractive in a lower-rate environment?
The general rule of thumb is that rising interest rates result in lower crypto prices, while declining interest rates result in higher crypto prices. That might sound simplistic, but when rates are lower, the cost of borrowing is lower. Moreover, risky assets suddenly appear more attractive on a relative basis. That generally leads to an infusion of new money pouring into crypto.