Crypto Bulls Smell Blood: SOFR–RRP Spread Hints QT Pivot By October
Crypto Bulls Smell Blood: SOFR–RRP Spread Hints QT Pivot By October
An obscure spread at the heart of US money markets just flashed a bright warning, and crypto traders are pouncing on the signal. The Secured Overnight Financing Rate (SOFR) printed 4.29% on Wednesday, while the Federal Reserve's overnight reverse-repo (ON RRP) award rate sat at 4.00%, putting the SOFR–RRP spread at 29 basis points on a non-quarter-end day — an unusually wide gap that points to tightening funding conditions in the plumbing of the financial system.
Article Summary
**Crypto Markets Rally as SOFR-RRP Spread Signals Potential Fed Policy Pivot** Cryptocurrency traders are capitalizing on critical money market indicators suggesting the Federal Reserve may halt quantitative tightening (QT) by October 2024. The Secured Overnight Financing Rate (SOFR) hit 4.29% Wednesday while the Fed's overnight reverse-repo rate remained at 4.00%, creating an unusually wide 29 basis point spread that signals deteriorating funding conditions in US financial markets. This SOFR-RRP divergence typically emerges when banking system liquidity tightens significantly, forcing the Fed to reconsider monetary policy. **Bitcoin** and major **cryptocurrencies** are experiencing increased buying pressure as investors anticipate a dovish Fed pivot that could boost risk assets and **DeFi** markets. The widening spread on non-quarter-end trading days represents a rare occurrence that historically precedes major Federal Reserve policy adjustments. **Crypto bulls** view this development as validation for their bullish thesis, with **blockchain** assets positioned to benefit from potential monetary easing. Market analysts suggest this money market stress could accelerate institutional **cryptocurrency** adoption as traditional funding mechanisms show strain.
