As the Federal Reserve gears up for its anticipated interest rate cut, speculation is rampant about what this move will mean for various markets, particularly in the world of crypto.

Investors are debating whether the Fed will opt for a 25- or 50-basis point cut, with the latter usually stemming potential economic instability. Yet, one thing remains clear — when interest rates go down, the crypto market tends to benefit.

Dmitriy Berenzon, a partner at Archetype, shed light on the broader implications of this rate cut for the crypto industry during a recent discussion on Coinage.

"Crypto still represents a risk-on asset," Berenzon noted, explaining that higher interest rates generally lead investors to safer, yield-bearing options like treasuries. When the Fed cuts rates, however, the flow of funds often shifts toward riskier assets, including crypto. Berenzon sees this as a positive signal, especially given the potential for increased fund flows into both liquid and private markets.

The conversation also touched on the growing appetite for risk in the wake of rate cuts. With many institutional investors hesitant to commit to new ventures amid higher rates, Berenzon believes a rate cut could help unlock some of that capital, providing a much-needed boost to the space.

"It's going to be good for both the liquid side and the private side," he said, adding that many crypto funds currently raising capital could see renewed interest from institutional investors.

While the short-term effects of the Fed's decision remain uncertain, Berenzon cautioned that investors should also consider external factors such as potential geopolitical events or economic disruptions like a real estate collapse in China. Still, overall, the prospect of a Fed rate cut is seen as a potential catalyst for the crypto market, setting the stage for more growth in 2024.

As of Monday afternoon, traders were favoring the odds of a 50-basis point cut to a 25-basis point cut by a margin of 63% to 37%, respectively.