50 basis point Fed rate cut, imminent danger for Bitcoin?

The Fed’s recent decision to cut its key rates has crypto analysts divided. While some are hoping for a boost for Bitcoin, others fear a negative reaction. While the Fed could start a cycle of rate cuts, a 50 basis point cut, which is being considered for next week, could surprise markets. This could affect risk assets, including Bitcoin, by highlighting deeper economic concerns.

Bitcoin: Jerome Powell's reaction to rate cuts

The FED, after capitulating, is preparing to begin a cycle of rate cutsbut according to 10x Researchthis could sound the alarm for bitcoin. An aggressive rate cut could signal economic concerns rather than insuranceputting pressure on risky assets like bitcoin.

Currently, traders estimate Less than 30% chance of a 50 basis point cut next weekIndeed, such a move could reflect growing concern about the economy, pushing investors to reduce their exposure to risky assets, including Bitcoin.

Markus Thielen, founder of 10x Research, noted that this cut could indicate a deeper economic concern.

On the other hand, A more modest decline could be seen as a prudent measure rather than as a signal of economic panic. This could mitigate the negative effects on bitcoin and other risky assets.

Hypotheses:

• A 50 basis point cut could signal increased economic concern, putting pressure on bitcoin, potentially reducing its value by 5-10%;
• A more modest cut of 25 basis points could be seen as a prudent measure, minimizing the negative effects on Bitcoin and resulting in a limited fluctuation of 2-5%;
• The anticipation of a rate cut could already be priced into the BTC price, making the real impact of the FED decision relatively small, with expected variations around 3%.

However, Uncertainty over actual size of drawdown keeps BTC investors on edge.

Crypto flagship: Impact and reactions

The rate cutting cycle could also affect cryptocurrency dynamics. While some see Rate Drop as an Opportunity for Cryptosothers warn of a potential correction. Here are some key points to consider:

• A 50 basis point cut could signal an economic emergency;
• Risky markets could respond by reducing their exposure;
• Bitcoin has already seen a strong rally on expectations of rate cuts.

Macro trader Craig Shapiro points out that Liquidity-hungry markets could push the Fed to opt for a more significant reductionbut current price levels of risky assets could lead to a correction.

The FED may not want to cause premature panic, preferring to avoid too large an initial cut. This could delay any substantial reaction in the crypto market.

Despite fears of a negative impact of this decision on bitcoin, some experts believe that the FED could, paradoxically, pave the way for a Bitcoin at $100,000.