The recent decision by the Federal Reserve to maintain interest rates has led to a temporary flight to safety, resulting in a broad-based bitcoin selloff. However, the head of strategy at 21shares, a leading crypto investment firm, believes that falling interest rates could actually benefit bitcoin and other risk assets in the long run.
Eliézer Ndinga, the Vice President of Strategy and Business Development at 21shares, explained that the selloff was partly driven by increasing tensions in the Middle East and fears of potential conflict escalation. However, he also highlighted the resilience of the U.S. bitcoin exchange-traded fund market, which has seen strong inflows despite the market selloff.
Looking ahead, Ndinga noted market expectations for future interest rate cuts. The market is fully pricing in a rate cut in September and a high probability of further rate cuts in November and December. He believes that these falling rates could lead to global liquidity expansion, which would be positive for risk assets like bitcoin and other cryptocurrencies.
As the global liquidity increases, investors may turn to bitcoin and crypto as an alternative investment option. This could potentially drive up the value and demand for these assets. It remains to be seen how the Federal Reserve’s decision on interest rates will ultimately impact the broader market, but according to Ndinga, falling rates could be beneficial for bitcoin and crypto in the long term.