Bitcoin Rallies Above $63,000 Following Fed Rate Cut

Cryptocurrency markets surged on Thursday in response to the Federal Reserve cutting interest rates by 50 basis points.

Bitcoin (BTC) and Ethereum (ETH) soared 7%, with BTC trading at $63,500 and ETH at $2,470. Polkadot (DOT) rallied 9%, while Solana (SOL) is up 12%. The total crypto market capitalization has risen 6% to $2.3 trillion in the last 24 hours.

Among the top 100 cryptocurrencies by market capitalization, top gainers include memecoin Popcat (POPCAT), which surged by 35%, followed by Sei (SEI), which increased by 28%, Celestia with a 24% gain, and Bittensor (TAO), which rose 19%. These gains are indicative of the broader positive sentiment sweeping through the market.

On Sept.18, the Federal Reserve reduced its benchmark rate to a range of 4.75% to 5%, down 0.5% from 5.25% to 5.5%. This is the first rate cut by the Fed in four years.

“I don't see anything in the economy that suggests the likelihood of a downturn is elevated. You see growth at a solid rate, you see inflation coming down, you see a labor market that's still at very solid levels,” said Fed Chair Jerome Powell.

The rate cut, however, sparked mixed reactions among market analysts.

The Kobeissi Letter questioned the Fed’s decision to begin the rate-cutting cycle with an outsized cut.

"If the Fed has only started with 50 basis point rate cuts during crises, why start with 50 bps this time?" they queried.

Historical data shows that such rate-cutting cycles, especially those starting with a 0.5% decrease, often lead to long-term losses for U.S. equities. In 2001 and 2007, markets fell by 31% and 26%, respectively, two years after similar rate cuts.

"The Fed continues to say the economy is strong and they are calling for a soft landing. But policy decisions are as if we are in a crisis. Something doesn’t add up here," they warned.

Trump’s Bitcoin Moment

In a moment that captured the attention of Bitcoiners, former U.S. President Donald Trump used Bitcoin to buy burgers at PubKey, a Bitcoin-themed bar in Manhattan. This happened days after Trump announced the launch of his decentralized finance (DeFi) platform, World Liberty Financial.

During his visit, Trump expressed support for the crypto community, encouraging them to vote in the upcoming elections. "It's a great place, I just made the first transaction in Bitcoin," he told the cheering crowd. He also criticized the U.S. Securities and Exchange Commission (SEC), hinting at more favorable regulations if he is elected in November.

Market Liquidations

Data from Coinglass reveals that the sudden rally caught many traders off guard. Short traders faced liquidations totaling $151 million in the last 24 hours, while long traders incurred $54 million in losses. Bitcoin liquidations alone amounted to $85 million, predominantly affecting short positions.

Stock markets also responded positively to the rate cut. The Dow Jones Industrial Average surged 1.5%, while the S&P 500 and Nasdaq Composite advanced 2% and 3%, respectively.