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Bitcoin hit a new high over the weekend before sinking Monday morning as markets brace for the Federal Reserve’s final interest rate decision of the year.
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The leading cryptocurrency fell below $104,000 to start the week, after reaching a record of $106,449 Sunday, according to CoinMarketCap. Ether, the second-largest cryptocurrency by volume, also hit a high of $4,016, before moderating just under $4,000.
The volatility comes just days before the Fed is widely expected to cut interest rates by another 25 basis points following the two-day Federal Open Market Committee meeting this week. If the central bank carries out a third consecutive decrease, that would leave rates at 4.25%-4.50% to end the year.
Low interest rates tend to benefit markets, even cryptocurrencies, because they improve investors’ appetite for risk and create excess capital used for investments.
Bitcoin, however, has rallied even amid the high interest environment in the U.S. Since March 2022, when the Fed began raising interest rates in response to pandemic-induced inflation, Bitcoin has risen 163%.
But many are expecting a slowdown in in rate-cutting next year, as inflation fears and a softening labor market could throw cold water on earlier expectations about the number and magnitude of reductions. Economists are bracing for quarterly cuts to the federal funds rate starting in March, for a terminal rate in the mid-3% range.
Of course, a pro-crypto White House is also helping fuel much of the crypto boom. In the weeks since Donald Trump’s election win, Bitcoin has hit multiple record highs, including surpassing the $100,000 milestone for the first time.
On the campaign trail, Trump called for a strategic national Bitcoin reserve, declared all Bitcoin should be mined in the U.S., and attached his name to multiple crypto projects.
The president-elect has tapped Paul Atkins, a cryptocurrency advocate, to chair the Securities and Exchange Commission following Gary Gensler’s departure — a move welcomed by the crypto industry. Atkins, who now leads the consulting firm Patomak Global Partners, has chaired The Digital Chamber’s Token Alliance since 2017, which was charged with advocating best practices and recommending legal frameworks that promote the crypto industry.
In an interview with CNBC (CMCSA0.00%) last week, Eric Trump said his father plans to “make America the crypto capital of the world,” including introducing “sensible regulation” of the industry.