Cryptocurrencies rally due to Federal Reserve action

Bitcoin and Ethereum regained ground after the Fed’s decision to cut interest rates last Wednesday, with other cryptocurrencies also rebounding.

A strong surge hit the cryptocurrency market, with Bitcoin (BTC) reaching $62,000 and Ethereum (ETH) breaking the $2,400 barrier after the U.S. Federal Reserve (Fed) decided to lower interest rates by 50 basis points (bps).

“Altcoins” also saw green across the board. Solana (SOL) and Toincoin (TON) surged over 4%, while Avalanche (AVAX) outpaced the other major tokens with gains exceeding 8%. Cardano (ADA) appreciated by 3%, and other tokens like Dogecoin (DOGE) and XRP posted more modest increases.

The anticipated rate cut proved to be positive for cryptocurrencies, although it was not well-received at first. Bitcoin initially dropped below $60,000 after the U.S. central bank announced the rate reduction but has since recovered during the Asian session.

Cryptocurrencies and risk assets appear to have responded well to the 50 basis-point cut, which some analysts had predicted could negatively impact the markets, as it might signal an excessive risk of recession.

In his remarks, Federal Reserve Chair Jerome Powell confirmed that the central bank has initiated a rate-reduction process, which will continue in the future.

The correlation between cryptocurrencies and risk assets surged to its highest level in a year and a half. This, they explained, highlights how macroeconomic factors have become increasingly important.