Tonight is another day that will go down in financial history. The Federal Reserves interest rate cut seems to be a foregone conclusion. People are no longer discussing whether there will be a rate cut, but the extent of the cut.
Financial institutions such as Bank of America, Goldman Sachs, Morgan Stanley, Barclays and Citigroup have predicted that the Federal Reserve will cut interest rates by 25 basis points tonight, but a more aggressive rate cut is not impossible. The CME Fed Watch predicts that the probability of a 50 basis point rate cut in September is 61%.
So now the question for us is how will the interest rate cut affect the price of Bitcoin.
Rhythm BlockBeats has sorted out some noteworthy viewpoints for readers reference. Lets wait and see tonight.
The environment is different from the past, and we are optimistic
Anthony Scaramucci, founder of hedge fund Sky Bridge
Anthony Scaramucci, founder of hedge fund Sky Bridge, said in an interview on Wednesday that the Federal Reserve may cut interest rates by 50 basis points tonight, which is part of a cumulative rate cut of at least 150 basis points in the next 18 months. He believes that this is good for asset prices in the United States and the world. Driven by a series of interest rate cuts by the Federal Reserve and clearer cryptocurrency regulation in the United States, Bitcoin will hit a record high of $100,000 by the end of the year.
Scaramucci said that some legislation supporting cryptocurrencies, Bitcoin and stablecoins will be passed early in the next U.S. Congressional term, which is bipartisan legislation supported by both Democrats and Republicans. At the same time, he is optimistic about the prospects for crypto rules under the Harris administration, as an adviser to his campaign team said Harris will support measures to help the industry develop while maintaining appropriate safeguards.
Zach Pandl, head of research at Grayscale Investments
Zach Pandl, head of research at Grayscale Investments, said in an interview with Forbes two weeks ago that “lowering interest rates in the context of a soft landing is quite unfavorable for the US dollar, but it is favorable for assets such as Bitcoin. Combining these factors, the market will explore historical highs again in the coming months.”
But Zach Pandl also said that if the unemployment rate continues to rise and signs of layoffs begin to appear, we may see a period of economic weakness, during which many assets such as Bitcoin and technology stocks will also weaken in a typical cyclical manner. Zach Pandl believes that the recession period will be a great time to accumulate Bitcoin because the market is likely to see loose monetary policy and loose fiscal policy next, just like what happened during the epidemic. But if the US labor market continues to deteriorate and the US economy falls into a short recession, Bitcoin may face downside price risks. This is the main risk we face in the next 6 to 12 months.
Will the interest rate cut trend in 2022 repeat itself?
Jake Ostrovskis, OTC trader at Wintermute
Jake Ostrovskis, an over-the-counter trader at market maker Wintermute, told Decrypt that a rate cut would mark a turn in monetary policy and believes it could boost cryptocurrencies. Historically, this move has increased liquidity in the financial system, which tends to favor risky assets like Bitcoin, in other words, the more investors willing to take risks, the more money they are willing to put into the field, which could lead to higher prices for digital assets.
CryptoSea founder Crypto Rover
CryptoSea founder Crypto Rover believes that the Federal Reserve is expected to cut interest rates by 50 basis points within 24 hours and is optimistic about the future development of Bitcoin. The last time this happened, the bull market for Bitcoin began.
Lark Davis, Founder of Wealth Mastery
Lark Davis, founder of Wealth Mastery, also combined the trend of Bitcoin when the Fed cut interest rates in 2022 to predict the impact of this rate cut. The last time the Fed cut interest rates, Bitcoin showed an upward parabolic trend. If history repeats itself, the next 6-12 months will be crazy.
Trader Ahmed @CryptoBheem
Trader Ahmed also believes that the rate cut will be good for Bitcoin, but the cashing process is more tortuous. He predicts that the market may fluctuate violently in the case of a 50 basis point rate cut, and after a 25 basis point rate cut, the market will experience a short-term decline before resuming the upward trend. If (the Fed cuts interest rates) by 50 basis points, I will sell all (the Bitcoin I hold).
Altcoins will have room to rise
Arthur Hayes: The market will collapse before entering a bull market after the rate cut, and ETH will perform strongly during the rate cut cycle
Arthur Hayes, co-founder of BitMEX, gave a keynote speech titled “Thoughts on Macroeconomics Current Events” on the first day of the TOKEN 2049 main venue. He said:
It was a huge mistake for the Fed to cut rates at a time when the US government is spending like crazy and spending the most money. This is compounded when inflation is above their target and real GDP has been growing at over 2% for about 8 to 9 quarters. So while I think a lot of people are looking forward to a rate cut and thinking that it will drive stocks and other markets higher, that is not actually the case. I think the market will collapse a few days after the rate adjustment because it will narrow the interest rate differential between the dollar and the yen.
I wanted to list some of the winners and losers in the changing interest rate environment from falling treasury rates and the interest income that can be generated by holding the safest fiat assets. Winners include ENA, ETH, ETHFI, and PENDLE, all of which I personally own a lot of, but I dont own ONDO. Maelstroms (his family office) portfolio is very well suited to a falling interest rate environment.
Many people believe that Ethereum has not made any progress at all in this round. Solana has performed very strongly in the bull run of the past few months. The main argument about Ethereum is that it is an Internet bond, an Internet bond with a yield of 4%. So why should I invest in this bond when the Treasury yield is above this level? But if the Treasury yield drops rapidly, then investing in ETH becomes profitable. The gains in Ethereum will exceed the gains in the US dollar and the gains in Treasury bonds. The Fed will cut rates, the market will collapse, and then reignite the bull run.
Trader Noodles
Trader Noodles believes that rate cuts usually increase liquidity in the market, which will lead to a depreciation of the US dollar, causing the US dollar index (DXY) to fall. The depreciation of the US dollar usually makes assets denominated in US dollars more attractive. Investors risk appetite may rise. Investors may turn to risky assets such as stocks and cryptocurrencies to seek higher returns.
But Noodless view is more radical. He believes that rate cuts -> decline in the US dollar index (DXY) -> increased risk appetite -> decline in Bitcoin market dominance -> ETH/BTC rebound -> altcoin rebound. When the markets interest in risky assets increases, investors may transfer funds from major cryptocurrencies such as Bitcoin to other assets, causing Bitcoins share of the overall market to decline. When funds flow to Ethereum and other mainstream altcoins, more funds in the market will also flow into other altcoins. As a result, the overall altcoin market may rebound, and the ETH/BTC trading pair will also rebound.
Michaël van de Poppe, Founder, MN Consultancy
Michaël van de Poppe, founder of MN Consultancy, believes that the Fed may first cut interest rates by 25-50 basis points. If this happens, Bitcoin will continue to rise to 65-68K US dollars. At the same time, the interest rate cut will also benefit DeFi and boost the rise of ETH. Although ETHs icon looks bad now, after the interest rate cut, ETH will also do something.
