On September 18, the US Federal Reserve reduced the benchmark federal funds rate by 50 basis points to the range of 4.75%-5%, ending the aggressive interest rate hike cycle that has dominated the last year.

The central bank expressed increased confidence in bringing inflation to a sustainable level close to the 2% target and said risks to employment and inflation targets were more balanced.

This interest rate cut was the first since the COVID-19 pandemic, which disrupted the global economy four years ago. This easing in monetary policy caused Bitcoin to rise, as it increased demand for risky assets, often with low interest rates.

Many analysts thought that interest rate cuts were already reflected in the prices of risky assets. However, some people, such as Arthur Hayes, argued that such moves by the US Federal Reserve could harm the market in the long run. However, in the short term, Bitcoin price showed a positive reaction.

Before the official announcement, Bitcoin had risen from $57,600 to $60,000. After the Fed’s 50 basis point cut decision, Bitcoin experienced serious fluctuation and the price went up and down several times immediately after the announcement.

As of this writing, Bitcoin settled at $61,969 and is up 2.8%, according to crypto.news data. The crypto asset’s daily trading volume increased by 17% to $48.2 billion, and its market capitalization stood at $1.22 trillion.

Liquidations have skyrocketed to $200 million per day, most of which comes from short positions. Bitcoin leads the way with liquidated positions of $75 million, followed by Ethereum with $35 million.

According to Alternative data, Bitcoin’s fear and greed index moved from the “fear” level to the “neutral” level.

The Fed’s decision comes after Chairman Jerome Powell hinted at a Jackson Hole symposium last month that policy changes were needed in the face of cooling inflation and rising unemployment.

Market sentiment was divided ahead of Wednesday’s decision. Traders were unsure whether the Fed would cut 25 basis points or a larger 50 basis point.

According to the CME FedWatch Tool, the market predicted a 40% chance of a smaller cut and a 60% chance of a larger 50 basis point cut, which ultimately happened.

The interest rate cut also led to high volatility in the precious metals market. Gold prices reached a record high of $2,600 per ounce from $2,550, then dropped to $2,545 and finally stabilized at $2,567.

Similarly, the US stock market initially made gains but later experienced slight declines. S&P 500 opened the day at 5,641 points, rose to 5,680 points, but ultimately closed at 5,618 points.

Nasdaq Composite followed a similar pattern; It opened at 17,663 points, passed 17,800 points and ended the day at 17,573 points. The Dow Jones Industrial Average experienced less volatility but closed the day with a small loss.

Although it is too early to draw general conclusions, the first 12 hours after the rate cut show that risky assets such as cryptocurrencies initially benefited from the Fed’s decision. However, it will be clear over time whether this positive trend will continue or whether Arthur Hayes’ pessimistic long-term prediction will be justified.