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Investment banking giant Goldman Sachs has given the good news that risky assets like Bitcoin (BTC) and altcoins have been waiting for. According to Reuters, Goldman Sachs, which expected the US Federal Reserve (Fed) to make its first interest rate cut in the fourth quarter of 2024, revised this prediction and pulled it to the third quarter. This means that the Fed will cut interest rates much earlier than previously predicted.
Goldman Sachs Delivers Good News for Bitcoin and Altcoins
Goldman Sachs’ revision in the interest rate cut prediction is extremely important for risky assets like Bitcoin and altcoins. This change in the investment banking giant’s forecast is particularly significant, coming on the heels of increased expectations for the approval of a spot ETF in the US, the impact of the rapidly approaching Bitcoin block reward halving being felt much more, and an acceleration in the decline in the 10-year US Treasury yield, referred to as the risk-free interest rate.
The Fed’s benchmark interest rate is currently between 5.25% and 5.5%, and Fed funds futures show that interest rates will fall to a range starting from 4% by the end of next year.
When interest rates drop, borrowing becomes cheaper and encourages risk-taking in the economy and financial markets, including cryptocurrencies. The opposite of this is sharp declines in risky assets when interest rates rise rapidly, as seen in 2022.
Fed Started Tightening Cycle in March 2022
As is known, the Fed had started the tightening cycle in March 2022 to control increasing inflation. The central bank raised the interest rate from a low level of between 0% and 0.25% to between 5.25% and 5.5%.
The last interest rate hike in the US was made in July. The rapid increase in borrowing costs in the country put heavy pressure on risky assets, including Bitcoin and altcoins, triggering serious price declines. After the destruction and collapses, the heavyweights of the financial world have started to predict that this process is coming to an end.
