According to 10x research, a cut of 50 basis points (bps), or 50 basis points in the interest rate by US Federal Reserve this month may negatively impact Bitcoin (BTC). cautions.
A 50 BPS rate cut could shock the market
It had started Fed to begin cutting interest rates for stimulating the economy. After raising interest rates by a whopping 50 basis points in March 2022 due to COVID related supply chain bottlenecks, and printing money to combat inflation. There is the possibility that a Fed rate cut of 50 basis points could cause Bitcoin and other risk-on assets to be impacted.
Bureau of Labor Statistics to release data on September 6, 2024 stated While unemployment is down slightly, US jobs are lower than anticipated. It has allowed the Fed to begin its rate-cutting campaign, since it does not want to damage businesses irreparably with high interest rates.
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According to 10x Research, a rate reduction of 50 basis points on September 18th 2024 could signal an unease about the economy. Unintentionally, it could convey to the public that the Fed feels the economy is beyond its control. looming Investors are forced to abandon risky investments such as stocks, cryptocurrencies and other financial instruments due to the economic slowdown.
One basis point is 1/100th a percentage. Most central banks increase and decrease rates of interest by 25 basis points or more, depending on how urgent the situation is. In 2022, the Fed increased interest rates several times by up to 75 bps or 50 bps in order to combat inflation.
Markus Thielen – founder of 10x Research – stated the following in a client note today:
The Fed will focus on mitigating risks to the economy, rather than managing the market’s reaction.
Adding:
Our view is that the probability of a cut by 50 basis points will be only 29%. This contrasts with what most people think. There is a growing chorus that says the Fed missed early signs of the weakening labor market in July.
It is critical that the Fed walks a thin line
Macro trader Craig Shapiro echoed In a recent post, 10x Research said that despite market pressures on the Fed not to raise interest rates. “go bigger and faster” With rate cuts, the government should not be tempted to start by cutting rates 50 bps.
Shapiro also added that without liquidity the market is unable to function. “revolts, sells off and finds the lower put strike level” This forces the Fed into a rapid rate cut and more liquidity. Shapiro claims that the value of risk assets will continue to decline until the Fed gives in and provides the market with what they want.
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Some analysts are more conservative than others think Bitcoin may start another rally in October 2024. BTC was trading at $55,296 as of press time with a global market cap exceeding $1.09 billion. according CoinGecko.
Chart by TradingView.com. Image courtesy of Unsplash.com.
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Source: www.newsbtc.com
