The Federal Reserve is set to meet this week, with expectations of a 25-basis-point rate cut. This decision could have a significant impact on both traditional stocks and digital assets like Bitcoin and Ethereum in the coming months.
According to Tom Lee, head of research at Fundstrat Global Advisors, Bitcoin and Ethereum could see substantial gains if the Fed moves forward with rate cuts. Lee believes that both assets are highly sensitive to liquidity and could experience a “monster move” in the next three months. He identified Bitcoin and Ethereum, along with the Nasdaq 100 and U.S. small caps, as key areas to monitor in light of potential rate cuts.
Bitcoin has historically been known to react more directly to changes in monetary policy compared to other assets. On the other hand, Ethereum, in addition to being sensitive to liquidity, also benefits from increased adoption. The use of blockchain technology by Wall Street and the rise of stablecoins have positioned Ethereum as more than just a speculative asset. Lee likened Ethereum’s role to the U.S. financial system in 1971 when new forms of innovation emerged after the dollar left the gold standard.
Social data indicates that bullish sentiment towards Bitcoin is currently at 64%, the highest level since July. This optimism reflects the growing expectations ahead of the Fed’s decision. However, it is worth noting that markets often go against the crowd. While a rate cut could initially boost Bitcoin and Ethereum, a surprise decision to hold rates steady could lead to a quick correction.
The Fed’s decision is expected to be announced tomorrow. The reaction from Bitcoin and Ethereum following the announcement will determine whether Tom Lee’s prediction of a major move in the market comes to fruition. Stay tuned to see how these digital assets respond to the Fed’s decision and how it shapes their performance in the near future.