A widely followed crypto analyst says the digital asset industry will continue to thrive despite the Federal Reserve cutting interest rates.
In a new video update, Coin Bureau host Guy Turner tells his 2.52 million YouTube subscribers that small cap stocks and crypto assets will continue to rise as the Federal Reserve continues to cut interest rates.
“In the short term, rate cuts are likely to boost markets, especially small cap stocks [are] most sensitive to interest rates.
The same goes for cryptocurrencies, especially altcoins, which appear to be highly correlated with small cap stocks. This is why crypto has developed rapidly, with altcoins leading the way, and why this will continue as long as the Fed continues to cut rates.”
However, Guy warns that his view only applies in the short term, as interest rate cuts will only fuel inflation in the long term.
“This bullish scenario only applies to the short term. Over the longer term, the Fed’s rate cuts risk reigniting inflation, which in turn risks interest rates rising.”
According to Guy, the market and the economy behave differently when confronted with interest rate cuts. The analyst says markets tend to trade immediately or even ahead of rate cuts, while it takes about two years for rate cuts to help the economy.
“The economy and the markets are two different things. Markets react immediately to rate increases, in fact, they often react before rate increases even happen…
This is why markets peaked in late 2021 when Fed Chairman Jerome Powell announced the central bank would raise rates, and it’s why markets crashed in mid-2022 when the Fed actually started raising rates.
Investors were unsure how high interest rates could rise and uncertainty is the most common cause of market crashes.”
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Featured image: Shutterstock/Salamahin/Mia Stendal