Rate cut boosts market sentiment, Bitcoin expected to reach new highs by year-end.

With the start of the U.S. interest rate cutting cycle, hopes for a soft landing have increased, leading to record highs for the S&P 500 and the Dow Jones Industrial Average. Bitcoin reached as high as 63,850 yesterday, while Ethereum also showed strength, nearing $2,500 at one point. Standard Chartered Bank believes that after the Federal Reserve's decision to cut interest rates by 50 basis points, there is potential for a continued boost in the broader digital asset market.

Fed Cuts Rates by 0.2%! Inflation Closer to Target, Focus Shifts to Achieving Soft Landing

Rate Cut Expected to Boost Digital Asset Performance

The Federal Reserve in the United States has officially initiated a rate cut cycle, lowering the federal benchmark interest rate by 2 basis points to 4.75% to 5%, with an additional 0.5% decrease expected by the end of the year. Yesterday, the stock market, gold, and cryptocurrencies all performed well driven by the funding market.

According to a report by The Block, Geoff Kendrick, Head of Forex and Digital Assets Research at Standard Chartered, stated that regardless of the outcome of the U.S. presidential election in November, macroeconomic factors are poised to drive up digital asset prices.

Following the FOMC meeting, digital assets have taken the lead in performance for the first time in a while. Despite today's Polymarket showing a 52/47 lead for Harris over Trump.

Kendrick attributes this positive performance to macroeconomic drivers beginning to outweigh election-related uncertainties.

Monitoring Yield Curve and Bitcoin ETF Flows

While the U.S. election is crucial, macro drivers are starting to take precedence. Kendrick is monitoring the difference between short-term and long-term U.S. Treasury bond yields as an indicator of market conditions favorable to digital assets.

I'm watching the U.S. 2s10s curve, a steepening U.S. yield curve is favorable for digital assets.

Since July 2022, the yield spread between the two types of government bonds has been negative, meaning short-term bond yields are higher than long-term bond yields, a phenomenon known as "inversion." The market perceives this as a sign of an impending economic recession. However, the spread began to turn positive again at the end of August.

Will the end of the yield curve inversion provide momentum for the rise of cryptocurrencies?

Additionally, investments in Bitcoin spot ETFs may further support Bitcoin prices.

Bitcoin Expected to Hit New Highs by Year-End

Kendrick reiterated his previous prediction that Bitcoin will reach an all-time high by the end of this year. If Trump wins, the potential target for Bitcoin would be $125,000, while if Harris wins, the potential target for Bitcoin would be $75,000.