Will Fed Rate Cuts Boost Crypto Prices?

Amid speculations on the Federal Reserve’s potential rate cut in September, BitMEX co-founder Arthur Hayes has shared his insights on the effects this decision could have on the cryptocurrency market and the Ethena (ENA) altcoin. A recent U.S. nonfarm payrolls report showed disappointing figures, along with a decline in bond yields, leading to discussions about a possible 50 basis point reduction, diverging from the expected 25 basis points.

What Could the Fed’s Decision Mean for Crypto?

On September 9, Hayes commented on the lower-than-expected U.S. 2-year Treasury yields and nonfarm payroll data, which reported just 22,000 jobs instead of the anticipated 75,000. These indicators bolster the argument for a more significant rate cut of 50 basis points, highlighting a weakening job market.

According to the CME FedWatch Tool, there is an 88% probability of a 25 basis point rate cut at the upcoming Fed meeting, with a further 70% chance of an additional 25 basis point reduction in December. If these cuts materialize, it is expected to inject new liquidity into the markets. The overall market capitalization of cryptocurrencies has dipped below $4 trillion following Bitcoin‘s slump, but potential rate reductions may change this landscape.

How Will DeFi and Ethena (ENA) Respond?

Hayes noted that lower rates might prompt significant funds in money markets to seek alternative returns, making decentralized finance (DeFi) a potentially attractive option.

In this regard, Ethena’s staked USDe (sUSDe) product, with its 7% yield, stands out, indicating that institutional investors might gravitate towards it. Ethena’s USDe supply is expected to surge from $12.98 billion to beyond $20 billion, capturing more market interest.

Hayes also forecasted a price rise for the ENA coin, predicting it could exceed $1.50 in the coming months. As of now, ENA is valued at $0.792, having seen a 4% increase in the last day and a 75% jump in trading volume. Hayes, who recently boosted his holdings, now owns 4.45 million ENA, worth $3.48 million.

“The possibility of rate cuts injects optimism into the crypto landscape, potentially reversing the recent downtrend,” said Hayes.

• A Fed rate cut might redirect funds towards alternative investments like DeFi.
• Ethan’s USDe product with a high yield could appeal to institutional investors.
• ENA’s price may climb above $1.50, based on market momentum and trading volume surge.

Hayes’ insights come at a time of critical financial decisions impacting both traditional and digital markets. Observers await the Fed’s next move, which could potentially reshape investments and influence cryptocurrency valuations.