Trump Urges Powell to Lower Interest Rates Further Due to Strong Performance of the US Economy in Q2
In the United States, the second quarter GDP report for the year has shown an annualized rate of 3%, marking a significant increase compared to the anticipated 2% growth by most experts. This positive economic growth could potentially influence the Federal Reserve's monetary policy decisions.
The potential for a Federal Reserve interest rate cut could have a positive effect on Bitcoin's price, as looser monetary policy tends to boost liquidity, reduce fixed-income yields, and encourage investors to seek higher returns in riskier assets like cryptocurrencies.
The reasoning behind this is threefold. First, interest rate cuts create a higher liquidity environment. When the Fed cuts rates, the money supply (notably M2) typically grows, providing more cash that can flow into risk assets including Bitcoin.
Second, reduced yields on bonds and savings make Bitcoin and other risk assets comparatively more attractive, leading investors to reallocate funds toward Bitcoin.
Third, Bitcoin prices often respond positively to Fed easing as it signals a cheaper cost of capital and greater risk tolerance. Conversely, when the Fed holds or raises rates amid inflation concerns, Bitcoin can face downward pressure.
However, it's important to note that market reactions also depend on inflation trends, Fed messaging, and broader macroeconomic factors. Recent Fed communications show cautiousness about inflation and a wait-and-see attitude on rate cuts. While some Fed members support cuts, no definitive moves have yet materialized, generating market volatility and subdued Bitcoin momentum.
The chances of a rate cut happening during the FOMC meeting later today are very slim. Nevertheless, the potential upside if a surprise cut occurs could be substantial. Analysts suggested Bitcoin could rally above $140,000 if the Fed unexpectedly lowers rates below its current ~4% levels, but this depends on wider money supply growth and economic conditions.
It's also worth mentioning that the performance of Bitcoin is closely tied to the US interest rate policy, as it is considered a riskier asset. This correlation was evident in the first quarter of 2025, when businesses piled up, leading to a -0.5% correction in GDP, which was the first decline in three years. This economic slowdown may have contributed to Bitcoin's stalling below its recent all-time high.
In conclusion, a Fed rate cut is broadly positive for Bitcoin due to enhanced liquidity, lower opportunity costs of holding crypto, and increased investor risk appetite. However, market reactions also depend on inflation trends, Fed messaging, and broader macroeconomic factors.
- The potential for a Federal Reserve interest rate cut could have a positive impact on the price of Bitcoin, as it creates a higher liquidity environment, reduces yields on bonds and savings, and encourages investors to seek higher returns in riskier assets like Bitcoin.
- Bitcoin and other risk assets become comparatively more attractive when yields on bonds and savings are reduced, which may lead investors to reallocate funds toward Bitcoin.
- Bitcoin prices often respond positively to Fed easing as it signals a cheaper cost of capital and greater risk tolerance.
- The performance of Bitcoin is closely tied to the US interest rate policy, and this correlation was evident in the first quarter of 2025, when an economic slowdown may have contributed to Bitcoin's stalling below its recent all-time high.
