The Federal Reserve is expected to begin its rate-cutting cycle next week, but a larger-than-expected 50 basis point (bps) cut could send worrying signals to the market. According to 10x Research, a significant rate cut may indicate economic weakness, potentially impacting risk assets like Bitcoin.
The Impact of a 50 Basis Point Cut
Typically, the Fed opts for 25 bps changes in interest rates, but a 50 bps cut may suggest a more urgent economic concern. Traders currently see a less than 30% chance of a 50 bps cut, but if the Fed goes that route, it could weigh on risk assets like Bitcoin and stocks.
Possible Effects on Bitcoin
While some expect the Fed’s liquidity easing cycle to boost risk assets, a more aggressive cut could dampen market enthusiasm. Markus Thielen, founder of 10x Research, noted that a 50 bps cut might trigger concerns that the Fed is falling behind in addressing economic challenges, leading to reduced exposure to riskier assets like Bitcoin.
Bitcoin's Uptrend at Risk?
Bitcoin’s recent uptrend has been partly driven by expectations of Fed easing, but if a 50 bps cut occurs, some fear it could already be priced into Bitcoin’s current levels. Traders and analysts will be closely watching the Fed’s decisions next week to gauge the broader market impact.
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