The US Federal Reserve (Fed) meeting on December 19, 2024 has sparked heated discussions within the cryptocurrency market, a sector extremely sensitive to monetary policies. While the Fed has opted for a moderate 25 basis point cut in its key rate, this decision will have significant repercussions on the entire crypto ecosystem.
A favorable short-term context for cryptos
Falling interest rates typically increase the appeal of risky assets, including cryptocurrencies. With bond yields falling, investors may seek to maximize their profits in alternative assets like Bitcoin or Ethereum. Historically, such monetary decisions have led to significant capital flows into cryptocurrencies, which are seen as hedges against inflation or the devaluation of fiat currencies.
Increased volatility following Fed caution
However, the caution displayed by the Fed, which plans to slow the pace of rate cuts in 2025, could keep some volatility in the crypto market. Investors will wait for clearer signals about the future direction of monetary policy, which could lead to significant fluctuations in crypto prices.
Impact on stablecoins and DeFi projects
Stablecoins, which are backed by currencies like the dollar, could benefit from increased demand. With lower interest rates, the yields offered by decentralized finance (DeFi) projects become more competitive with traditional investments. This could drive increased adoption of DeFi platforms and stablecoins like USDT or USDC.
Risks related to possible regulation
Despite a slightly more accommodative monetary environment, tensions around cryptocurrency regulation remain a sword of Damocles. If the Fed maintains a cautious approach to avoid an economic shock, lawmakers could accelerate their efforts to regulate the crypto market, particularly in the face of the expansion of CBDCs (central bank digital currencies).
Long-term outlook
Overall, the Fed meeting could provide a short-term rebound opportunity for cryptocurrencies. However, their future performance will largely depend on the evolution of the regulatory framework, investors’ perception of global economic stability, and the Fed’s approach to rate cuts in 2025.
In conclusion, cryptocurrencies could benefit from monetary easing in the short term, but medium- and long-term uncertainties, particularly in terms of regulation and volatility, will continue to shape the market. Investors will have to remain cautious while closely monitoring the Fed's future decisions.
