Market participants They are waiting impatiently The next meeting of the Federal Open Market Committee (FOMC), which is expected to play a crucial role In shaping the short-term outlook for Bitcoin and other digital assets. It highlights the possibility of interest rate cuts, and many traders and investors have been speculating about this for some time now.
Although the exact size of the rate cut has yet to be confirmed, there is Widespread anticipation The FOMC decision could either cut interest rates by 25 basis points or cut them by 50 basis points. According to one prominent economist, the FOMC decision could either lead to a sell-off in risky assets like Bitcoin or give them a boost.
Economist predicts huge news selling event
Recently conversation In an interview with The Block, Johns Hopkins University economist Steve Hanke shared his take on the potential consequences of the expected interest rate cut by the US Federal Reserve on the cryptocurrency sector. According to Hanke, the 25 basis point rate cut, which many investors are currently anticipating, could ultimately lead to a “sell-the-news” event for the broader cryptocurrency industry.
He explained that the market has already priced in the possibility of such a cut, and the price action in many investment markets has already absorbed it. In fact, once the cut is officially announced, the market reaction may be disappointing, which could lead to a wave of sell-offs among cryptocurrencies.
In contrast to the expected 25bp cut, Hanke noted that the Fed’s 50bp rate cut has not yet been fully priced into the market. So a 50bp rate cut by the Fed could “give the market a boost” in a surprise.
What to expect in light of the upcoming FOMC meeting?
Inflation in the United States has begun to slow, with Federal Reserve Chairman Jerome Powell suggesting last month that “the time has come” to cut interest rates. The rate is currently in the 5.25%-5.50% range, the highest in 23 years. In the context of the Federal Open Market Committee (FOMC), the rate refers to changes in the federal funds rate. The Fed raises or lowers interest rates primarily to stimulate economic growth and control inflation.
In theory, the Fed’s interest rate cuts could provide a favorable environment for cryptocurrencies. Lower interest rates mean that traditional savings and fixed-income investments (such as bonds) offer lower returns, prompting risk-averse investors to turn to cryptocurrencies.
However, given current market conditions, predicting the market’s reaction to a rate cut is difficult. Easy to say but hard to do At the time of writing, this is because the expected interest rate cut was one of the factors that contributed to the rise in the value of Bitcoin earlier this year, leading to speculation about whether the rate cut had already been priced in.
At the time of writing this article, Bitcoin is being traded The stock price reached about $60,000, an increase of 3.5% in 24 hours.
Featured image created using Dall.E, chart from Tradingview.com