The current U.S. benchmark rate for massive overnight money market loans from the central bank is in the range of 5.25% and 5.5%.
When Powell spoke in Jackson Hole, Wyoming, on Friday, markets expected more signals of a regime of interest rate cutting ahead. Instead, he went a step further and explicitly endorsed rate cuts. In fact, he said it’s not a matter of if there will be cuts but how deep to make them:
“The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks.”
How It Could Affect Cryptocurrency Prices
Lower interest rates and a rising dollar supply could drive up crypto prices for blockchains with supply-capped token economies. Some digital assets correspond to inventories that have hard all-time supply caps. In a low-interest-rate dollar environment, they can become precious commodities.
Tom Porcelli, U.S. chief economist at PGIM Fixed Income, said:
“I don’t think that the Fed has to fear inflation. At this point, it’s right that the Fed is now more focused on labor versus inflation. Their policy is calibrated for inflation that is much higher than this.”
Moreover, the Bureau of Labor Statistics is releasing a revision of Q1 job growth, showing it was a million jobs lower than the previous estimate. Weaker labor markets, combined with falling consumer prices, give the Fed the opportunity and impetus to make steep cuts when they lower rates.
That gives the economy a more abundant flow of cheaper credit to grow its businesses, which is also good for automated Web3 businesses managed by the blockchain.
Unlike the U.S. dollar and other central bank currencies, the following four cryptocurrencies have hard supply caps that limit their expansion. Some crypto investors like that because it means increasing dollar supplies can boost support for their prices.
1. For Keeps: Bitcoin (BTC)
Like the benchmark interest rates and industrial energy prices per kilowatt hour, Bitcoin price is always on the radar for crypto traders. The seminal and class-leading cryptocurrency was such a big hit in the first place in large part because of its supply-capped currency incentives.
The dollar is plummeting
Now negative for the year pic.twitter.com/7ALO0Y7wo9— Tom Crown (@TomCrownCrypto) August 21, 2024
When the Federal Reserve reverts again soon to an interest rate cutting regime— what watchers call a “dovish” Fed, as opposed to a rate-hiking “hawkish” Fed— the economics of the more plentiful dollar supply against the more dear supply of Bitcoin tends to become a strong support for Bitcoin price in the long term, with big short-term gains when markets rally.
2. Build And Build (BNB) Staying Big
Binance Coin (BNB) is another supply-capped token to watch when the Fed starts moving rates again. BNB is the main token for the Binance ecosystem, with fee discounts and other benefits.
In addition to traders using them as the native swap currency on Binance, BNB is the stem cell smart contract token for the Binance Smart Chain (BSC), currently known as the Build ‘N’ Build Chain. You can pack a lot of autonomous features into these bad boys.
BNB led 24-hour gains among top cryptocurrencies Tuesday, while Bitcoin, Ethereum, Solana, and Dogecoin corrected. Binance Coin prices could rally again soon. Changpeng Zhao, the crypto exchange’s founder and former CEO, finishes his four-month jail term in a few weeks.
The cryptocurrency remained up nearly 7.5% for the week on Sunday, and 2.4% for the 1-month timeframe. It’s up 165% for the trailing 12-month period.
3. Ripple (XRP) Is Connecting The World
Ripple (XRP) tokens aim to connect the world. That’s as a result of the RippleNet’s fast, low-fee, secure, and reliable protocols for enterprise cross-border payments, tailored for banks and institutions.
Since Dec. 2020, XRP has faced a headwind from the SEC lawsuit. But following a mounting series of victories in court, the long—and short-term outlook for XRP seems promising.
Ripple prices surged early this week while gathering strength to the upside. Daily trading volume increased by 60% as the asset rose 4.5% in 24 hours. One analyst recently predicted a possible short-term market gain to resistance at $0.65.
XRP was still up 6% in the 7D window and more than 2% on the 30-day chart Sunday. It has gained 16% yearly.
It is a supply-capped cryptocurrency. Its relative supply to central bank currencies like the dollar is a major factor in its crypto price on exchange markets in addition to its commercially marketable use cases.
4. Cardano (ADA) Is Change Making On
With the Cardano Chang upgrade in progress and aiming to be completed soon, markets may reward the Ethereum alternative by boosting ADA prices on crypto exchanges.
The Chang upgrade will give token holders more power over the network’s governance. This will enhance ADA’s value with more features and benefits and a stronger decentralization meta.
Cardano price led 24-hour and 7-day gains among top cryptos Wednesday, posting an 8.6% gain for the week on a 7% daily candle.
Meanwhile, Bitcoin and Ethereum notched up a percent-and-a-half and a percent for the day respectively, with Bitcoin up one percent on the week and Ethereum price down by 2.5% over the seven-day span.
Cardano was still bagging gains Sunday, with a 15% lead on Aug. 25 over its Sunday prices a week ago. So the upgrade narrative is likely still feeding the ADA economy inflows from crypto investors that read the news.
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