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Federal Reserve Cuts Interest Rates?Bitcoin Dominance May Rise As A Result

BY Benzinga | ECONOMIC | 11/08/24 11:25 AM EST

Crypto analyst Benjamin Cowen suggests that Bitcoin (CRYPTO: BTC) dominance might continue climbing, even as it hits his long-standing 60% target, following the Fed's recent 25 basis point interest rate cut.

What Happened: In an update on his YouTube channel, Cowen analyzed the Federal Reserve's decision to reduce rates to lowest level since February 2023 and maintain quantitative tightening by continuing to reduce its holdings in Treasury securities and mortgage-backed securities.

He highlighted that Bitcoin's dominance has typically peaked (60%) only after quantitative easing (QE) starts. This time, he sees two possible scenarios: Bitcoin dominance could begin a topping process, or it might overshoot its peak before settling back.

He also emphasized monitoring Ethereum's (CRYPTO: ETH) performance against Bitcoin, as it plays a key role in dominance trends. Cowen recommended dollar-cost averaging in altcoins as the market heads into the post-halving phase.

Quoting the Federal Reserve’s press release, Cowen highlighted that the committee plans to "continue reducing its Holdings of Treasury Securities and agency debt and agency mortgage-backed Securities." He stressed the potential influence of this decision on the crypto market.

<figure class="wp-block-image size-full">Benzinga Future of Digital Assets conference</figure>

Also Read: Bitcoin, Ethereum, Solana Rally Does Not Mean All Cryptocurrencies Will Moon: 10x Research

Why It Matters: Despite his cautious outlook, Cowen anticipates Bitcoin will adhere to its cyclical behaviour. He warned, however, that a broader market correction could interrupt these patterns, impacting both Bitcoin and altcoins.

The Federal Reserve’s decision to lower interest rates has slowed the pace of rate cuts compared to September, when policymakers opted for a more substantial 0.5% cut to initiate the easing cycle.

A senior research strategist noted that that the Fed's gradual cuts toward a "neutral" 3% rate could be partly due to Trump's policies, including tariffs, which may have a reflationary effect.

What’s Next: The influence of Bitcoin as an institutional asset class is expected to be thoroughly explored at Benzinga’s upcoming Future of Digital Assets event on Nov. 19.

Read Next:?

  • Bitcoin As America’s Gold? How Trump’s Bitcoin Act Could Reshape US Reserves

Image: Shutterstock

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