Crypto market after the FED: Recovery, consolidation, or stepping into a new era?

The monetary policy from the Federal Reserve (FED) is a crucial factor that impacts the global financial market, including the cryptocurrency market, which is a risky asset sensitive to changes in interest rates and monetary policy.

After the FED has been controlling inflation over the past few years through continuous interest rate hikes, the crypto market has faced significant pressure. However, recent signals from the FED indicate a new direction, leading to the important question of where the crypto market will head next.

The role of the FED in the global economy and the crypto market

The FED is the central bank of the United States, which plays a crucial role in controlling interest rates and maintaining financial stability, especially during periods of inflation or economic recession. The decisions made by the FED directly impact risk assets such as stocks, gold, and digital assets.

• Interest rate hikes: Result in higher borrowing costs and investors often withdraw money from risky assets.
• Maintaining or lowering interest rates: Creates hope in the financial market and often attracts capital back into risky assets.

Current situation: FED and the crypto market

In 2024, the FED continues to pursue a policy focused on controlling inflation but has adopted a more relaxed stance than before. Several times, the FED has signaled that it might slow down interest rate hikes or start considering interest rate cuts if the U.S. economy shows signs of slowing down, which would benefit global financial markets, including cryptocurrencies.

Impact on the crypto market

Price recovery

• If the FED signals a monetary easing, such as lowering interest rates or delaying interest rate hikes, it will lead investors to look for high-yielding risky assets, such as Bitcoin and various altcoins.
• Cryptocurrency prices, such as Bitcoin (BTC) and Ethereum (ETH), often respond positively to such signals.

Liquidity has increased.

• The easing of liquidity from monetary policy has increased the circulating capital in the market, resulting in higher investments in crypto from both retail and institutional investors.

Viewing crypto as a safe asset (Safe Haven)

• In an uncertain global economy, some cryptocurrencies, such as Bitcoin, are compared to gold as a hedge against inflation.
• The market is correcting due to volatility.

If the FED takes a more aggressive stance than expected, the crypto market may experience a short-term correction, but the long-term trend still depends on the acceptance of digital assets in the global financial system.

Possible scenarios for the crypto market

The market is recovering. (Scenario 1)

• The FED signals a monetary easing.
• Investors are seeking returns from risky assets.
• Cryptocurrency prices, especially Bitcoin and Ethereum, have recovered.

Short-term correction (Scenario 2)

• The FED maintains high interest rates in the long term.
• The crypto market is consolidating, but there is still accumulation from long-term investors.

Stepping into a new era (Scenario 3)

• The acceptance of digital assets at the institutional level
• The growth of Web3 and Blockchain technology
• The crypto market will grow steadily without being as dependent on FED policies as before.

The crypto market, following the FED's policy, has a high chance of recovering from the previous tightening financial pressures. However, there is still a possibility of a correction if there are negative external factors, such as global economic uncertainty or stricter regulations.

However, with the development of Blockchain technology and the institutional acceptance of crypto, the crypto market may enter a new era that focuses on sustainability and creating value for the digital economy. Investors should closely monitor these factors and plan their investments carefully to prepare for the changes that will occur in the future.