Market Review: A Hawkish Interest Rate Cut

Cryptocurrency markets have left behind a very active week, with Bitcoin losing up to 10% and Ethereum losing up to 20%.

In the United States, an additional 25 basis point interest rate cut was made this week, in line with expectations. Under normal circumstances, this situation is expected to have a positive impact on the markets, but Powell’s statements after the decision had the opposite effect on the market. The hawkish stance, which foresees two interest rate cuts instead of four in 2025, created a headwind in both stock and cryptocurrency markets.

In addition, Powell’s negative speech about the Bitcoin reserve (which should be described as speculation) increased the negative impact on the cryptocurrency markets. However, the reserve issue concerns the Congress, not the FED, and requires a vote. Additionally, states (Texas last week) have begun initiatives to hold Bitcoin.

Let’s talk about the situation of spot ETFs in the USA;

A 15-day streak of positive inflows in spot Bitcoin ETFs ended with a record outflow of $680 million on Thursday. Although this debut was accompanied by $277 million on Friday; Looking at the week as a whole, a total positive inflow of nearly 450 million dollars was recorded. On the Ethereum side, an 18-day series of positive entries, similar to Bitcoin, ended with an outflow of $ 60 million on Thursday.

One of the controversial topics of the week was Blackrock’s latest advertising campaign about Bitcoin. In the video, viewers are told for three minutes about the evolution of money and the basics of Bitcoin, one of which is Bitcoin’s 21 million supply.

At this very moment; A warning text stating that Bitcoin’s 21 million supply limit is not guaranteed was met with reaction on social media. Although there is nothing wrong with this statement, the idea that it refers to the supply limit, one of Bitcoin’s core values, caused reactions and brought conspiracy scenarios.

(Let’s open an additional parenthesis here. For any change to be made in the working principles of Bitcoin, a consensus is required among miners. Otherwise, miners trying to bring different features automatically leave the system and start operating a new and different network, that is, what we call a fork. This has happened in the past years This is the reason for the emergence of Bitcoin derivative cryptocurrencies such as BCH, BSV, BTG.)

On the other hand; There is a blockchain launch on Deutsche Bank’s zksync network that has made less noise than I expected. This step by the German banking giant may be an important step for the transition of traditional financial markets to the blockchain world. Of course, this chain will not be decentralized like other chains we can think of because they need to manage the legal compliance process. Still, seeing central financial institutions also stepping into the blockchain launch process, where cryptocurrency exchanges (coinbase, kraken, etc.) are pioneers, makes us curious about future products and integrations.

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