Crypto News- Federal Reserve Interest Rate Cuts: A Catalyst for Crypto Growth?
Crypto News- A significant interest rate cut by the United States Federal Reserve could be more beneficial for risk assets and the crypto markets than many believe, according to Joe McCann, the CEO of Asymmetric, a crypto hedge fund.
Current Market Expectations for Rate Cuts
As the Federal Reserve prepares to cut rates from their current 24-year high of 5.5% on September 18, 2024, McCann describes the decision as a coin flip between a 25 or 50 basis point cut. He notes that when the Fed futures markets price an outcome at a 70% probability, it has historically achieved a 100% success rate.
Fed Futures Tool Insights
According to the CME Fed Watch tool, there is currently a 65% chance of a larger 50 basis point cut, compared to a 35% likelihood for a 25 basis point cut. Recent media coverage and statements from former Fed governors have shaped market expectations toward a 50 basis point reduction.
Positive Outlook for Risk Assets
McCann argues that a 50 basis point cut would likely be positive for risk assets, including cryptocurrencies. Saad Ahmed, head of Asia Pacific at crypto exchange Gemini, agrees, suggesting that markets may have already priced in the rate cut but that it could still serve as a catalyst for a breakout.
Understanding the Context of Rate Cuts
McCann challenges the notion that a 50 basis point cut would be bearish. He points out that previous rate cuts were often responses to emergencies, such as the 2008 financial crisis and the 1990s dot-com bubble. In contrast, he describes the current economy as booming with a stable 3% GDP growth.
Rationale Behind a Larger Rate Cut
The rationale for a larger cut includes stimulating economic growth into 2025 and reducing net interest payments for the US Treasury. This would allow individuals to sell homes, refinance mortgages, and safeguard against potential adverse economic indicators before the presidential election.
Market Uncertainty and Fed Decisions
On September 17, the macroeconomics blog The Kobeissi Letter highlighted, The market has never been so uncertain about a Fed interest rate decision in at least 15 years. This uncertainty underscores the critical nature of upcoming Fed decisions and their potential impact on risk assets and the broader economy.
FAQs
What impact could a Fed interest rate cut have on the crypto market?
A significant rate cut by the Federal Reserve could positively influence the crypto market by making risk assets more attractive, potentially leading to increased investment in cryptocurrencies.
What are the current expectations for the Fed’s rate cut?
Market expectations indicate a 65% chance of a 50 basis point cut and a 35% chance of a 25 basis point cut as the Fed prepares to make a decision.
Leave a comment