Bitcoin Troubled by 0.50% Fed Rate Cut Amid Recession Fears: 10x Research

Bitcoin and other risk assets are under pressure from an aggressive U.S. Federal Reserve rate drop, according to 10x Research.

On September 9, 10x Research CEO Markus Thielen advised clients that the apparently optimistic liquidity easing cycle may start poorly for risk assets.

A 25 basis point decrease is preferred, as liquidity grows and recession worries recede, but a more aggressive cut might hurt Bitcoin.

A 50 basis point drop may “signal deeper concerns to the markets,” signaling a failure to counteract the economic downturn. Investors may limit Bitcoin risk exposure.

Thielen said that the Fed's “primary focus will be mitigating economic risks rather than managing market reactions.”

According to CME's fed watch tool, traders expect a 50 basis point decrease at 29%, but 10x Research questions this “prevailing consensus.”

Weak Job Data Fuels Recession Fears
The Sahm Rule Recession Indicator, which monitors economic downturns, rose to 0.53 from 0.43 in early August after disappointing July U.S. employment statistics, increasing recession fears.


After August's dismal employment report, these anxieties have grown. FRED data shows the Sahm Rule Recession indicator rose to 0.57. 10x Research said:

After being surprised in July, the Fed is now being accused of missing labor market weakness.

However, some experts say poor employment data is no problem. Mohamed El-Erian, Alianza adviser and former Pimco CEO, said the new statistics support his prediction that the US economy would escape a recession.


Bitcoin Could Drop 20% Under an Aggressive Rate Cut
Bitfinex researchers cautioned on September 2 that a US rate decrease may be “challenging time” for Bitcoin traders.

A 50 basis point rate drop might cause Bitcoin to fall further as “recession concerns escalate.” Analysts added:

When rates are reduced this month, BTC may drop 15-20% to $40-50k.

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