An aggressive 50 basis point rate cut by the Federal Reserve next week could indicate heightened economic concerns, potentially leading investors to reduce exposure to risk assets like Bitcoin (BTC) and stocks, according to 10x Research. Currently, the Chicago Mercantile Exchange's (CME) FedWatch tool shows a nearly 30% chance of such a rate cut, which would lower rates to the 4.75%-5% range.

Markus Thielen, founder of 10x Research, noted that "a 50 basis point cut may signal deeper concerns to the markets, but the Fed's primary focus will be on mitigating economic risks rather than managing market reactions." Thielen's view aligns with traditional market experts who believe the Fed is behind the curve, having missed signs of labor market weakness after being surprised by data in July.

Macro trader Craig Shapiro added that the Fed is unlikely to start with a 50 basis point cut because the economy does not warrant panic. "Liquidity-addicted markets may want a 50 basis point cut and will correct lower until the Fed opts for bigger reductions," he said. He also warned that risk assets will continue to correct until the Fed provides the desired relief, noting that with elevated prices of stocks and credit spreads, the correction levels could be significantly lower.

Past data shows that the start of a rate-cutting cycle does not always stimulate asset prices, regardless of the initial move’s size. Additionally, the expected Fed easing has been a key factor behind Bitcoin's rise from $20,000 in January 2023, raising the question of whether a potential rate cut is already factored into current market prices.

But I hope for a bull Run

Always do your research before investment.

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