Time To Dump Bitcoin? Economist Predicts Massive ‘Sell The News’ Event

Market
participants

are
eagerly
awaiting

the
upcoming
Federal
Open
Market
Committee
(FOMC)
meeting,
which
is
expected
to

play
a
crucial
role

in
shaping
the
short-term
outlook
for
Bitcoin
and
other
digital
assets.
The
spotlight
is
on
the
potential
for
an
interest
rate
cut,
and
many
traders
and
investors
have
been
speculating
about
it
for
some
time
now.

Although
the
exact
magnitude
of
the
rate
cut
has
not
yet
been
confirmed,
there
is

widespread
anticipation

that
the
FOMC
will
opt
for
either
a
25-basis
point
reduction
or
a
more
substantial
50-basis
point
cut.
According
to
a
prominent
economist,
FOMC’s
decision
could
either
lead
to
a
sell-the-news
event
for
risky
assets
like
Bitcoin
or
give
them
a
boost.

Economist
Predicts
Massive
‘Sell
The
News’
Event

In
a
recent

conversation

with
The
Block,
Steve
Hanke,
an
economist
from
Johns
Hopkins
University,
shared
his
perspective
on
the
potential
implications
of
the
U.S.
Federal
Reserve’s
anticipated
interest
rate
cut
for
the
cryptocurrency
sector.
According
to
Hanke,
a
25-basis-point
rate
cut,
which
many
investors
currently
expect,
could
ultimately
result
in
a
‘sell-the-news’
event
for
the
broader
crypto
industry.

He
explained
that
the
market
has
already
priced
in
the
possibility
of
such
a
reduction
and
has
been
absorbed
into
the
price
action
of
several
investment
markets.
In
fact,
once
the
cut
is
officially
announced,
the
market’s
reaction
could
be
underwhelming,
potentially
triggering
a
wave
of
sell-offs
among
cryptocurrencies.

In
contrast
to
the
more
expected
25-basis-point
reduction,
Hanke
pointed
out
that
a
50-basis-point
cut
by
the
Federal
Reserve
has
not
yet
been
fully
priced
into
the
market.
As
such,
a
50-basis
point
rate
cut
by
the
Fed
could
surprisingly
“give
the
market
a
lift.”

What
To
Expect
In
Light
Of
The
Upcoming
FOMC
Meeting

Inflation
in
the
US
is
starting
to
cool
down,
with
Federal
Reserve
Chair
Jerome
Powell
noting
last
month
that
“the
time
has
come”
for
rate
cuts.
The
rate
points
are
currently
in
the
5.25%-5.50%
range,
its
highest
level
in
23
years.
In
the
context
of
the
Federal
Open
Market
Committee
(FOMC),
rate
points
refer
to
changes
in
the
federal
funds
rate.
The
Fed
raises
or
cuts
interest
rates
primarily
to
stimulate
economic
growth
and
control
inflation. 

A
reduction
in
the
Fed’s
interest
rates
could,
in
theory,
provide
a
favorable
environment
for
cryptocurrencies.
Rate
cuts
mean
that
traditional
savings
and
fixed-income
investments
(like
bonds)
offer
lower
returns,
prompting
risk-averse
investors
to
turn
to
cryptocurrencies.

However,
given
the
current
market
conditions,
predicting
the
market
reaction
to
a
rate
cut

is
easier
said
than
done

at
the
time
of
writing.
This
is
because
the
expected
rate
cut
is
one
factor
that
contributed
to
Bitcoin’s
increase
earlier
in
the
year,
leading
to
speculations
about
whether
the
rate
cut
is
already
priced
in.

At
the
time
of
writing,

Bitcoin
is
trading

at
around
$60,000,
up
by
3.5%
in
24
hours.

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