Fed News: How a 50 bps Rate Cut Could Impact Bitcoin Price

The Federal Reserve is expected to begin its rate-cutting cycle next week, a move that could significantly affect risk assets like Bitcoin. According to 10x Research, if the Fed chooses a 50 basis point (bps) cut, it could signal serious concerns about the economy, causing investors to pull back from cryptocurrencies and stocks. Although the chance of a 50 bps cut is currently below 30%, Friday’s U.S. jobs report has increased speculation that the Fed may act.

Markus Thielen, founder of 10x Research, explained that while the Fed’s goal is to reduce economic risks, such a big cut could suggest deeper worries about the economy’s outlook.

Here’s What to Expect Ahead

The Chicago Mercantile Exchange’s FedWatch tool shows a 29% chance of a 50 bps cut, which contrasts with the broader market view. Thielen’s concerns are shared by other market experts, who believe the Fed may be behind, especially after weak labor data in July.

Impact on Risk Assets

Despite these concerns, Bitcoin surged on Friday, nearing $60,000 as traders became optimistic about a larger-than-expected rate cut from the Federal Reserve. Bitcoin hit $59,735, its highest level since early September, with a 2.5% gain for the day. This recovery follows a dip in September, where Bitcoin fell to $53,300 after a disappointing August jobs report. Now, traders believe the Fed’s decision could lift risk assets like Bitcoin, even as concerns about the U.S. economy remain.

This speculation is also fueling discussions on future bitcoin price predictions.

Will a 50 bps Cut Lead to a Correction?

However, not all are optimistic. Macro trader Craig Shapiro cautions that a 50 bps cut could trigger corrections in risk assets. He notes that markets addicted to liquidity might demand even deeper cuts from the Fed, and until that happens, assets like Bitcoin could face downward pressure.

Is the Rate Cut Already Priced In?

Historically, the start of a rate-cutting cycle doesn’t always boost asset prices, leaving investors cautious. Bitcoin’s rise from $20,000 earlier in 2023 was largely driven by expectations of Fed easing. This raises the question: has the upcoming cut already been factored into Bitcoin’s price? While traders seem to have priced in the potential cut, analysts still expect Bitcoin to maintain its upward momentum, with any slight dips unlikely to have a major impact.

The Federal Reserve’s upcoming decision will be crucial, as it could set the course for Bitcoin and other risk assets in the coming months. Investors are now closely watching the Fed’s next move to see how it will impact the market.

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Only time will tell whether the Fed’s decision will be a boon or a bust for Bitcoin. But one thing is certain: the cryptocurrency market is on the edge of its seat.