On June 11, U.S President Donald Trump praised the May CPI (Consumer Price Index) report, where inflation pressure reduced on a monthly basis, calling it “great numbers.”
In the latest post on Truth Social, Trump has once again urged the Federal Reserve to cut the interest rate by “one full point.” According to him, if fed slash interest rates by 100bps, it could reduce interest payments on U.S. debt, which currently stands at $36.22 trillion.
How Will the Crypto Market React to a Fed Interest Rate Cut?
The rising national debt of the U.S. has triggered panic in the overall financial market, pulling down stock markets. Not only in the U.S. stock market, the debt concern has also sparked shockwaves in Europe. Also, Trump’s tariff war has created turbulence in the cryptocurrency market.
The prominent hedge fund manager, Ray Dalio, has raised alarm against the rising debt problem, calling it an “economic heart attack” for the U.S. He thinks that the national debt would reach about $50 trillion.
The cryptocurrency market, which is already making a wave with a historical rally in the market, could be boosted if the Fed cuts interest rates amid rising debt tensions as investors seek higher-yielding assets.
Lower interest rates weaken the dollar, which makes Bitcoin and other altcoins more attractive options as hedges against inflation and currency devaluation.
In such scenarios, risk appetite may increase, which could boost capital inflows into cryptocurrency. However, if debt concerns go out of control and escalate, it could turn into an intense financial crisis with a spike in short-term volatility.
Historically, cryptocurrency has benefited from loose monetary policy, but extreme macroeconomic instability might spark correlated sell-offs. However, there is less hope for interest rate cuts due to feud between Donald Trump and Federal Reserve Chair Jerome Powell.
At the time of writing, Bitcoin is trading at around $109,765 with a 6.7% hike in a month. On the other hand, altcoins like Ethereum are revolving around $2,839 with a 13% surge in a month. This shows growing confidence of investors in the cryptocurrency market.
Also Read: Connecticut Bans State Investments in Bitcoin Under New Law
