There is still much division over the size of the interest rate cut that the US central bank (Federal Reserve) will announce tonight.
There is also much discussion about the impact a short-term rate cut would have on Bitcoin (BTC) and the rest of the crypto market. Joe McCann, CEO of hedge fund Asymmetric, shared his prediction of what to expect tonight.
‘Coin flip’ on size of rate cut
According to McCann, also the founder of Asymmetric, both a 0.25% and 0.50% cut are realistic scenarios for tonight. In any case, he is convinced, like almost every other analyst, that the rate will be cut from the current 24-year high of 5.25% – 5.50%.
The vast majority of the futures market (61%) believes that rates will be cut by 0.50%, while the remainder expect a mild cut of 0.25%. McCann points out that, historically, when at least 70% of futures traders agree on an outcome, it almost always comes to pass. This time, things are still tense in that regard.
McCann thinks the crypto market will take a hit if the interest rate is cut by 0.25%. On the other hand, he expects the market to get a boost if the rate is cut aggressively by 0.50%.
With the idea that lower interest rates are bullish for risky assets like cryptocurrencies – because capital simply becomes cheaper – this ‘prediction’ is not at all outlandish. However, the vast majority of analysts seem to expect the opposite in the short term. This has to do with the fact that a 0.50% cut would fuel fears of a recession.
McCann pointed out that the Fed’s last rate cuts of 0.50% were emergencies – such as those during the 2008 financial crisis, the dot-com bubble in the mid-1990s and the global “Black Monday” stock market crash in 1987. However, McCann said today’s “booming” economy is different and more stable, with GDP growing at 3%.
Press conference at least as important
Not only the interest rate decision itself can influence the price of bitcoin, but also the press conference of Fed Chairman Jerome Powell that follows. If there is a rare interest rate cut of 0.50%, Powell’s speech could further fuel or calm the panic on the financial markets.
At 8:00 PM Dutch time we will hear what will happen to the interest rate, and at 8:30 PM Powell will give his explanation from the podium.
Source: https://newsbit.nl/hedgefondsmanager-crypto-kan-exploderen-bij-renteverlaging-van-050/
