Bitcoin, Ethereum Shrug Off Central Bank’s Interest Rate Cut

The U.S. central bank slashed the interest rate 0.25% on Wednesday, a widely expected move that left crypto markets largely unimpressed. 

Bitcoin was trading at about $111,700, down 3% over the past 24 hours. The largest cryptocurrency by market capitalization has sagged more than 10% after dropping below $105,000 earlier this month. Ethereum, the second-largest digital asset by market value, was changing hands at about $4,000, a 3.2% decline gain since Tuesday, same time.

Central bankers dropped the rate that banks charge each other for overnight lending of reserves held at the Fed to a range between 3.75% and 4%, after jobs data and other economic indicators pointed to a slowing U.S. economy.

An interim September jobs report by the Chicago Fed last month showed unemployment remaining around 4.3%, a four-year high. On Tuesday, the Conference Board’s Expectations Index, a widely watched measure of economic sentiment remained below the threshold that typically signals a coming recession.

The Federal Reserve’s concerns trumped those about inflation, which has remained stubbornly above the bank’s target of 2% annually. The Consumer Price Index rose 3% in the 12 months through September, the Bureau of Labor Statistics said, continuing an upward trend that began after a 2.3% reading in April. 

On Tuesday, the CME FedWatch Tool, which uses futures trading data to infer trader sentiment, predicted a more than 99% probability of a .25% rate cut. On Myriad, a prediction market that tends to offer a more conservative forecast, showed about 90% of respondents expecting the same. (Disclaimer: Myriad is a unit of Dastan, the parent company of an editorially independent Decrypt.)

Investors awaited Fed Chair Jerome Powell’s comments on ending the bank’s quantitative tightening. The bank has been unloading Treasuries and mortgage-backed securities as it aimed to bolster financial markets and wrestle inflation under control a few years ago when the economy was on shakier ground. 

A turn toward less restrictive monetary policy with a higher tolerance for inflation, coupled with lower rates injecting liquidity into markets, could bolster Bitcoin and other risk-on assets, said some analysts in the run-up to the Fed’s decision. 

Last month, the Fed slashed the federal funds rate by 0.25%, its first cut since last year. The previous inaction had angered U.S. President Donald Trump, who, fearful of being associated with an economic cratering, criticized Powell regularly and threatened to fire him.