4 December 2024

BlackRock CEO Larry Fink Warns of Slower Federal Reserve Rate Cuts Amid Bitcoin Price Surge

Larry Fink, CEO of BlackRock, warns that the Federal Reserve may not cut interest rates as quickly as expected, impacting Bitcoin's price surge amid economic challenges.

In recent days, Bitcoin and other cryptocurrencies have experienced a significant price surge, largely driven by rising expectations of a substantial stimulus package from China.

The price of Bitcoin has recently approached its all-time high, nearing $74,000, as Tesla's CEO Elon Musk has declared a "financial emergency," which some analysts believe could further elevate Bitcoin's value.

As the Federal Reserve faces a challenging economic landscape, Larry Fink, the CEO of BlackRock— the world's largest asset manager— has issued a cautionary statement, suggesting that the Fed may not reduce interest rates as quickly as the markets anticipate.

Fink, who manages approximately $10 trillion in assets, made these comments during a Bloomberg panel at Saudi Arabia's Future Investment Initiative conference. He predicted that there would only be one interest rate cut by the Fed before 2025, contrary to market expectations of two cuts.

"I think it’s fair to say we’re going to have at least a 25 basis-point cut, but I believe we have greater embedded inflation in the world than we’ve ever seen," Fink stated.

Last month, the Fed surprised market participants with a 50 basis point cut, initiating a cycle of reductions after a period of aggressive rate hikes aimed at controlling inflation exacerbated by the pandemic.

The anticipation of significant rate cuts this year has contributed to a bullish trend in Bitcoin prices, with the cryptocurrency market rebounding alongside stock markets.

High interest rates have increased the cost of servicing the $35 trillion U.S. debt, with Musk warning that interest payments now account for 23% of all federal tax revenue, labeling the situation a "financial emergency."

In addition, Anthony Scaramucci, founder of SkyBridge Capital, has suggested that the Fed may allow inflation to rise more than previously to navigate the looming debt crisis, which could further propel Bitcoin prices.

Scaramucci forecasts that Bitcoin could reach $170,000 by mid-2026, resulting in a market capitalization of approximately $3.3 trillion, attributing this potential rise to Bitcoin's limited supply and increasing demand.

This demand has been amplified by the recent introduction of spot Bitcoin exchange-traded funds (ETFs) on Wall Street, particularly BlackRock's Bitcoin fund.

On Wednesday, BlackRock's Bitcoin ETF recorded $872 million in net inflows, marking its largest inflow since its launch in January and surpassing the previous record set in March.

Rachael Lucas, a crypto analyst at BTCMarkets, noted that the surge in BlackRock’s Bitcoin ETF inflows is influenced by several factors, including a global trend among central banks to lower interest rates, which enhances liquidity and accessibility of capital for investors.

Source: Forbes