Cryptocurrency Surges on Fed Rate Cut, Trump’s DeFi Details

A new rally

The cryptocurrency market surged after the US Federal Reserve cut interest rates by 50 basis points on Wednesday.
Bitcoin
climbed 7% on Thursday and Friday morning, surging past $64,000. Ether followed with a 9% gain, while Solana
Solana
Interest rates topped both, jumping 12%. Some feared that a 50bp rate cut would cause market apprehension, as it could suggest that the Fed was more concerned about the state of the economy than previously thought. However, the positive reaction to the news across asset classes suggests some optimism that the Fed can deliver the long-awaited soft landing without tipping the economy into recession.

Ahead of the 2pm EST rate announcement on Wednesday, an interesting dichotomy emerged between traders’ expectations. The CME FedWatch tool, which measures sentiment based on federal funds futures pricing data, indicated a 55% probability of a 50bp cut, while Polymarket, a prediction betting site that has become the crypto hit of 2024, put the probability at just 38%. In this case, CME FedWatch proved more accurate.

The Trumps are venturing into DeFi

On Monday, Donald Trump unveiled World Liberty Financial (WLFI), a cryptocurrency venture run by his sons, Donald Jr. and Eric.

“We have to be on top, whatever we do. Cryptocurrencies are one of those things that we have to do whether we like it or not,” Trump said, live from Mar-a-Lago, his country club in Palm Beach, Florida. “If we don’t do it, China will do it. China is doing it anyway,” he added, apparently unaware that cryptocurrencies have been illegal in China since 2021.

While details are scarce, WLFI is reportedly built on DeFi lending giant Aave and involves stablecoins, tokens pegged to traditional currencies like the U.S. dollar. WLFI plans to launch a governance token, giving holders voting rights similar to shareholders. The token allocation includes 63% for the public sale, 17% for user rewards, and 20% reserved for “team compensation,” covering advisors, hires, and, of course, the Trump family. Read more.

Sources: Forbes Digital Assets, CoinGeckoRates effective from 4 p.m. on September 20, 2024.

Louisiana Innovates in Crypto Payments

Louisiana has become the first US state to accept cryptocurrency for government services. The state now allows payments in bitcoin, bitcoin lightning, and USDC
USDC
the first transaction having been processed on September 17 by the Ministry of Wildlife and Fisheries.

In partnership with Bead Pay, a crypto payment processor, Louisiana is converting these digital payments into U.S. dollars before they are deposited into state accounts. The move is part of a broader wave of crypto policy initiatives sweeping the United States, where 26 states have introduced over 80 crypto-related bills in January 2024 alone, following the SEC’s approval of several Bitcoin ETFs.

Elsewhere

Lawmakers say cryptocurrency legislation could pass by year-end

Former Coinbase Employees Launch Stablecoin-Focused Cryptocurrency Exchange

Silvergate Capital Goes Bankrupt After Crypto Bank Shuts Down