Following the recent Federal Reserve announcements, Bitcoin exhibited significant volatility, momentarily plummeting to $89,000 before stabilizing around $90,000. Despite a partial recovery, Bitcoin’s failure to break the $94,000 resistance has led to another downturn for altcoins. Concurrently, the Central Bank of Turkey (TCMB) announced an interest rate cut exceeding market expectations. What can we anticipate for today?
TCMB Rate Cut
Just minutes ago, the TCMB announced a reduction in interest rates from 39.5% to 38%. This decision was made following a lower than anticipated inflation rate in November, reflecting a trend of declining interest rates in the year’s final meeting. The USDTRY pair exhibited little movement; however, the long-standing upward trend persists.
“In November, consumer inflation was unexpectedly low due to developments in food prices. The main trend in inflation saw slight declines in October and November following an increase in September. Third-quarter growth has surpassed forecasts, while early indicators for the final quarter suggest that demand conditions continue to support the disinflation process. Although inflation expectations and pricing behaviors show improvement signs, they remain risk factors for the disinflation process.
A tight monetary policy stance will strengthen the disinflation process through demand, exchange rates, and expectation channels until price stability is achieved. The Committee will determine policy rate steps by ensuring the tightness required by disinflation, considering inflation realizations, trends, and forecasts in line with intermediate targets. The scope of measures is reviewed through a meeting-based and prudent approach focused on the inflation outlook. Should the inflation outlook deviate markedly from intermediate targets, monetary policy will be tightened.
The Committee will set policy decisions to achieve monetary and financial conditions that will bring inflation to the 5% target in the medium term, adopting a transparent, predictable, and data-driven framework.”
Cryptocurrency Expectations
Despite the Federal Reserve meeting market desires, Powell’s cautious stance and the expectation of only two rate cuts next year continue to pressure cryptocurrencies. This extended timeline has significantly muted the impact of the numerous rate cuts over the past year. The interest rate hike cycle was swift in 2022; however, the rate drop has been equally gradual. In the near future, on January 15, we will witness MSCI’s delisting of crypto reserve companies. Additionally, February or March might see the Supreme Court potentially revoking tariffs imposed during Trump’s tenure. The interest rate decision in Japan on December 19 is another major pressure point.
Additionally, the coming year marks a midterm election year in Turkey, meaning that unless special attention is paid to cryptocurrency regulations, the likelihood of these becoming law decreases, potentially exacerbating negativity in the crypto market. This suggests that a promising first quarter may not be on the horizon. The primary reason for the lack of risk appetite in cryptocurrencies could be due to this uncertainty.