A widely followed crypto analyst says that the digital assets industry will continue to thrive despite the Federal Reserve cutting interest rates.
In a new video update, Guy Turner, the host of Coin Bureau, tells his 2.52 million YouTube subscribers that small-cap stocks and crypto assets will continue to surge as the Federal Reserve continues to cut rates.
“Short term, rate cuts are likely to boost the markets – particularly small cap stocks as they [are] the most sensitive to interest rates.
The same is true for cryptocurrencies, particularly altcoins, which seem to be highly correlated to small cap stocks. This is why crypto has been rallying hard with altcoins leading the way and why it will continue so long as the Fed keeps cutting rates.”
However, Guy cautions that his view only applies to the short-term as rate cuts in the long run will only rekindle 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.”
According to Guy, the market and the economy behave in different ways when facing interest rate cuts. The analyst says that markets tend to act immediately or even before rate cuts while it takes about two years before rate cuts can help the economy.
“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…
This is why the markets peaked in late 2021 when Fed Chairman Jerome Powell announced the central bank would be raising interest rates and it is why the markets crashed in mid 2022 when the Fed actually started raising interest rates.
Investors weren’t sure how high interest rates could go and uncertainty is the most common cause of market crashes.”