Will the Fed Rate Cut Boost or Crash the Crypto Market? BitMEX Founder Sounds Alarm

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On September 18, the Federal Reserve is expected to lower interest rates by 25 to 50 basis points. This decision could have a significant effect on the cryptocurrency market. While some believe the rate cut could push Bitcoin’s price higher, BitMEX co-founder Arthur Hayes warns that it might actually lead to a sharp decline in crypto values.

Why does Hayes think this rate cut could harm Bitcoin and other digital assets?

Fed’s First Rate Cut in Four Years: What’s Different?

The Federal Reserve is about to announce its first interest rate cut in four years. Initially, a smaller cut of 25 basis points was expected. However, recent trends suggest a larger 50 basis point cut is more likely. Historically, rate cuts have been good for Bitcoin, often driving prices up as investors seek alternative assets.

Crypto Crash Incoming?

Despite the optimism, Arthur Hayes has a different view. He believes cutting rates now could make inflation worse. Lower rates mean cheaper borrowing, which can lead to even more inflation. Hayes also warns that a rate cut could strengthen the yen, which might lead to a sell-off in risky assets like cryptocurrencies.

He points to a similar event in August when the Bank of Japan raised rates. This caused Bitcoin to drop sharply from $64,000 to $50,000 in just one week. Hayes fears that if the Fed cuts rates, the crypto market could face an even bigger crash.

Are Central Banks Losing Control?

Central banks might be losing their grip on the economy. As market strategist Russel Napier believes governments are taking charge of monetary policy and focusing on cutting debt, making central banks less important. Arthur Hayes agrees and sees this shift as great news for cryptocurrencies. 

According to Hayes, as governments take over control and create targeted liquidity, crypto assets will become even more crucial. Politicians will take control and guide banks to inject money into specific sectors.

In this new economic landscape, Hayes argues that cryptocurrencies are positioned to grow.

“Crypto is the only global asset that can help you escape the traditional financial system.”

More Rate Cuts in 2024: What to Expect

According to a Reuters poll of 101 economists, the Fed is expected to cut rates three more times next year—in September, November, and December. By the end of 2024, the federal funds rate could drop to between 4.50% and 4.75%. These cuts aim to bring rates down to a neutral level, which experts estimate to be between 2% and 3%.

Blockware CEO notes that these cuts are designed to balance the economy, but they could also have a big impact on the cryptocurrency market. Investors should be ready for possible market shifts as these changes take effect.

Is Arthur Hayes’ prediction too pessimistic? Or do you agree that a rate cut could spell trouble for cryptocurrencies?