Crypto Rally Tied to Fed Rate Cuts, Analyst Suggests

A well-known crypto analyst believes the digital asset market will continue to do well, even as the Federal Reserve cuts interest rates. Guy Turner, the host of Coin Bureau, shared his thoughts in a recent video with his 2.52 million YouTube subscribers. According to him, both small-cap stocks and crypto assets, especially altcoins, will likely see growth as the Fed continues to lower rates.

Turner explained that small-cap stocks are particularly sensitive to interest rates, and this is reflected in the crypto market. “Short term, rate cuts are likely to boost the markets—particularly small-cap stocks as they [are] the most sensitive to interest rates,” he said. He pointed out that altcoins tend to be closely correlated with small-cap stocks, which explains why crypto has been rallying, led by altcoins.

However, Turner also provided a word of caution, noting that this growth may not last in the long term. While the immediate effect of rate cuts may be positive, he warned that ongoing cuts could eventually fuel inflation. “This bullish scenario only applies to the short term. In the longer term, the Fed’s rate cuts risk reigniting inflation, which in turn risks sending interest rates higher,” he added.

Turner went on to explain the difference between how markets and the broader economy respond to changes in interest rates. Markets, he noted, tend to react immediately, often even before the rate cuts are officially implemented. “The economy and the markets are two different things. Markets react to rate hikes right away; in fact, they often react before rate hikes even happen.”

He pointed to the market peaks in late 2021, when Fed Chairman Jerome Powell announced that interest rate hikes were on the horizon. The markets crashed in mid-2022 when the Fed started raising rates, Turner said, adding that uncertainty about how high rates might go contributed to the decline. “Uncertainty is the most common cause of market crashes,” he concluded.