A possible 50 basis point (bps) rate cut by the US Federal Reserve next week could spark concern among risk assets, including Bitcoin (BTC), according to a report by 10X Research.
10X Research Warns That 0.50% Fed Rate Cut Could Trigger Bitcoin Volatility
The Fed is expected to begin a rate cutting cycle, with the first reduction expected to occur at the Federal Open Market Committee (FOMC) meeting on September 18.
While low interest rates typically boost markets, an unusually large cut could signal growing economic risks and cause investors to reassess their exposure to risk assets such as cryptocurrencies and stocks.
“While the Fed’s 50 basis point cut signals deeper concerns for markets, the Fed’s primary focus will be on reducing economic risks rather than managing market reactions,” Markus Thielen, founder of 10X Research, wrote in a note to clients on Monday.
Thielen correctly predicted earlier this year that Bitcoin would surge to $70,000 in the first quarter.
The Fed typically favors 25 basis point rate adjustments, but larger moves are chosen when there is urgency, as seen in the 2022 tightening cycle when inflation control is crucial.
The Fed’s decision to opt for a 50 basis point cut could indicate the central bank is concerned about a potential economic slowdown, which could lead to a pullback in riskier assets as investors become more cautious.
Traditional market experts echoed Thielen’s concerns. While liquidity-dependent markets might prefer a 50 basis point cut, the Fed likely wants to avoid creating panic given that current economic data is still showing slow growth, said macro trader Craig Shapiro.
*This is not investment advice.
