The Fed's sharp rate cut stimulates demand for risky assets, and BTC hits a three-week high

Author: Danmo Anran

On Friday (September 20), Bitcoin hit a three-week high as global stock markets rose as the Federal Reserve's sharp interest rate cut had a ripple effect on the market.

As of press time, Bitcoin is now reported at $62,974.12 per ounce, and the digital token once rose to $64,133.32.

The Federal Reserve cut borrowing costs by 50 basis points, the first rate cut in more than four years. But Fed Chairman Jerome Powell carefully avoided promising a similar pace of rate cuts in the future, saying that rate cuts would be guided by economic data. This delicate outlook suppressed market reactions during the U.S. trading session on Wednesday.

Caroline Mauron, co-founder of Orbit Markets, a provider of liquidity for digital asset derivatives trading, said: "The positive start of the easing cycle is good news for risky assets such as Bitcoin. It will take a few hours for the market to see the big picture and start to reflect the improved outlook."

Before the Fed meeting, opinions diverged on whether officials would choose to raise interest rates by a quarter percentage point or half a percentage point. Powell and his colleagues are trying to keep the U.S. economy strong as labor market and inflation risks become more balanced.

"The focus will soon shift to the size and scope of this cycle," said David Lawant, head of research at FalconX. "The most important factor to watch from now on will be the trajectory of economic activity."

Lavant said the correlation between cryptocurrencies and traditional investments such as stocks has risen recently, suggesting that macroeconomic variables have been influencing the digital asset market.

On the other hand, U.S. Treasuries fell, which may reflect Powell's cautious signal about the scale of future monetary easing.

"The Fed's ongoing response function remains unclear. They are still on an unplanned path," Chris Weston, head of research at Pepperstone Group, wrote in a report.