A September Fed rate cut is now less likely for the crypto space, and is likely to reduce the pace of the crypto bull run. Here’s how.
The crypto market may be heading into a slower bull run for August, as expectations for a U.S. Federal Reserve interest rate cut in September took a sharp hit.
After Fed Chair Jerome Powell’s latest comments, investors are now pricing in just a 40% chance of a cut. This is down from 63% before the announcement.
That drop has sparked debate in the crypto space. A delayed rate cut means higher borrowing costs, which could soften investor appetite for high-risk assets like cryptos.
The Federal Open Market Committee (FOMC) left interest rates unchanged at 4.25% to 4.5%. This was a widely expected move. However, despite the lack of surprise, Powell’s tone during the press conference left markets uneasy.
He offered no promises for a cut in September, and instead stressed the need to monitor data over the next two months. As such, the rising tariffs, sticky inflation and a strong job market have made it hard for the Fed to justify any kind of easing just yet.
“We have made no decisions about September. We don’t do that in advance,” Powell said.
As of writing, inflation is now at 2.7%, which is above the Fed’s 2% target. Worse, inflation has been climbing for four straight months, while the central bank opts for caution.
This means that the Fed now seems more likely to hold rates steady in the coming months rather than stimulate the economy through cuts.
The issue of a slower crypto bull run is directly linked to interest rates. Low rates make the trad-fi sector less attractive. In essence, investors are more likely to pump capital into riskier, higher-yield assets like Bitcoin and altcoins.
When interest rates fall, borrowing becomes cheaper. Traders and institutions are more willing to take on risk (even with leverage). That kind of behaviour typically fuels growth in crypto markets. So when a cut gets delayed, the brakes tap lightly on the market’s rally.
The effects on the crypto market were almost immediate. After Powell’s comments, Bitcoin briefly dipped before rebounding. As of Thursday morning in Asia, the total crypto market cap hovered around $3.94 trillion. So far, the market has been largely range-bound for two weeks, and is moving sideways as it waits for stronger macro signals.
Despite the rate cut delay, some analysts are still bullish. According to recent predictions from CoinCodex, Bitcoin could see steady gains throughout August. Their models predict that Bitcoin could see a gradual uptrend which is driven by ETF inflows, declining exchange balances and improving sentiment.
In summary, CoinCodex’s models do not predict a massive rally. Rather, Bitcoin is expected to enter a solid, sustainable climb. If the current base holds through mid-August, Bitcoin could retest resistance levels near $70,000 and possibly push higher later in Q3.
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