As we step into crypto markets in 2024, the global financial landscape is witnessing unprecedented shifts, with digital assets playing a pivotal role in shaping the future of finance. Amidst this dynamic environment, understanding the intricate relationship between the crypto market and the Federal Reserve’s interest rates is crucial for investors, analysts, and enthusiasts alike.
The year 2024 unfolds against a backdrop of technological advancements, regulatory developments, and a maturing crypto ecosystem. Cryptocurrencies, once considered on the fringes of mainstream finance, have gained recognition and adoption on a global scale. However, the interconnectedness between traditional financial institutions and the crypto market has never been more pronounced.
Crypto market in 2024 – The making or the breaking of the DeFi ecosystem
For the past two years, the prospect of increased interest rates has influenced markets, but rates have finally reached a tipping point. The Federal Reserve has held interest rates stable in four of its last five meetings, including the one ending December 13, after hiking rates 11 times this economic cycle.
Few analysts now believe that the end of rising rates is near as inflation, which fell to 3.1 percent in November, gains control. Over the last two years, higher interest rates have impacted equities, cryptocurrency, and commodities such as oil.
According to market observers, the US Federal Reserve’s recent decision to halt interest rate hikes—and potentially decrease rates in 2024—could boost crypto prices and related stocks.
In an interview this week, BlackRock fund manager Jeffrey Rosenberg hailed the Fed’s policy shift as a “green light” for investors. As market analysts observed, the S&P rose 1.37% as a result of the rate halts.
According to analysts, the crypto sector would gain from the dovish approach as well. Following the Fed’s declaration that it may decrease interest rates next year, shares of top crypto exchange Coinbase rose roughly 7.7%.
This bullish sentiment can go on for a while, at least until we get a new round of economic data […] The message is clear: the Fed is more than willing to see an easing in financial conditions.
Jeffrey Rosenberg
Already, there are indications of an expanding institutional interest. Crypto investment products witnessed record weekly inflows last week, according to CoinShares data. $126 million was invested in blockchain-related equities. Also, crypto funds received an additional $43 million for the eleventh consecutive week.
Will the bull market last?
At present, the value of Bitcoin (BTC) stands at $42,733.51, accompanied by a 24-hour trading volume of $18,970,346,183.85. This signifies a -0.54% decrease in price over the last twenty-four hours and a -1.40% decrease over the last seven days.
The global crypto market capitalization value is $1.69 trillion, representing a change of -0.03% over the last twenty-four hours and 92.22% over the last year. The current market capitalization of Bitcoin is $837 billion, which signifies a 49.42% market share for BTC. Stablecoins, meanwhile, have a market cap of $131 billion, or 7.72% of the total crypto market cap.
While lower interest rates may boost crypto price hikes in the short term, some market observers believe the trend may somewhat dampen excitement for asset tokenization. With yields rising in decentralized finance (DeFi), investors may find larger returns than in real-world asset sales in a low-rate environment, they claimed.
Nonetheless, the approaching Bitcoin halving in 2024 is seen as the most powerful catalyst on the horizon for the broader crypto complex. Historically, deliberate supply cuts have preceded parabolic bull runs.
TradFi and DeFi to deal with the market recession in 2024?
While major market indexes such as the S&P 500 struggled for much of 2022, they rebounded in 2023 and are presently approaching their all-time highs. The S&P 500 is up almost 20%, while the Nasdaq Composite is up about 38%.
But what about the long-awaited recession? The market’s recent relative strength suggests that investors may be more hopeful – or at least less gloomy – than they were in 2022. Many analysts predict a “soft landing” for the economy, in which inflation falls, and unemployment rises slightly, but the economy does not enter a full-fledged recession.
So, following a strong run-up in 2023, there may still be plenty of potential for markets to fall further if the economy deteriorates dramatically.
