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A large interest rate cut by the United States Federal Reserve would be better for risk assets and the crypto markets and not bearish as some believe, says the chief of a crypto hedge fund.
Asymmetric founder and CEO Joe McCann told Cointelegraph it was a “coin flip” on a 25 or 50 basis point interest rate cut as the US central bank is poised to cut rates from their current 24-year high of 5.5% on Wednesday, Sept. 18, for the first time since March 2020.
McCann said when an outcome is priced at a 70% chance in the Fed futures markets, it historically has a 100% success rate.
The CME Fed Watch tool currently has a 65% chance of a larger 50 basis point cut, compared to 35% odds on a 25 basis point <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/arthur-hayes-explains-why-fed-rate-cuts-wont-help-bitcoin" rel="noopener noreferrer nofollow" target="null" text="null" title="null">rate cut</a>.&nbsp;
He added recent media coverage and statements from former Fed governors have influenced market expectations toward a 50 basis point cut.
<figure><img alt="Crypto poised for boost if Fed cuts rate by 50 bps, says hedge fund boss" name="" src="https://s3.cointelegraph.com/uploads/2024-09/019203a2-2abf-7161-9595-ecd2349f28bb">
 <figcaption style="text-align: center;">
 Probability of Sept. 18 rate cut size. Source: <a data-ct-non-breakable="null" href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html" rel="noopener noreferrer nofollow" target="null" text="null" title="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html">CME Fed Watch tool</a>&nbsp;
 </figcaption>
</figure>
However, McCann said a lower 25 basis point cut could be bad for crypto markets.&nbsp;
<blockquote>
 “I think if the Fed cuts 25 basis points, the equities markets will take a serious hit. Crypto will likely fall along with that. And the reason is, you’ve got stocks at all-time highs assuming a 50 basis point cut.”
</blockquote>
But if the Fed cuts 50 basis points it would likely be positive for risk assets like crypto, he added.&nbsp;
Saad Ahmed, head of Asia Pacific at crypto exchange Gemini, told Cointelegraph that the markets may have already priced in the rate cut, but it could <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/bitcoin-price-tough-call-fed-rate-decision-zerocap" rel="noopener noreferrer nofollow" target="null" text="null" title="null">influence</a> a breakout.&nbsp;
<blockquote>
 “I think a lot of these things are probably built into the price already because people are anticipating it. However, sometimes it’s good to have a catalyst for the price to break out of a range.”
</blockquote>
If there is a larger 50 bps cut, “Ultimately, you know, risk-on is back on the table,” he added.&nbsp;
McCann disputed the widely held notion that a 50 bps cut <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/federal-reserve-rate-cut-bearish-bitcoin-price-bitfinex-analysts" rel="noopener noreferrer nofollow" target="null" text="null" title="null">would be bearish</a>, noting that the last few times the Fed cut rates were emergencies, like during the 2008 financial crisis, the mid-1990s dot-com bubble, and the 1987 Black Monday crash.
Related: <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/markets-see-0-5-fed-rate-cut-5-things-bitcoin-this-week" rel="noopener noreferrer nofollow" target="null" text="null" title="null">Markets see 0.5% Fed rate cut — 5 Things to know in Bitcoin this week</a>
However, the current “booming” economy is different and more stable now, with 3% GDP growth, McCann said.
Additionally, the rationale for a larger cut includes stimulating growth into 2025, reducing net interest payments for the US Treasury — enabling people to sell homes, refinance mortgages and protect against potential bad data points before the presidential <a data-ct-non-breakable="null" href="https://cointelegraph.com/learn/how-crypto-politics-could-shape-the-next-us-presidential-election" rel="noopener noreferrer nofollow" target="null" text="null" title="null">election</a>.
On Sept. 17, the macroeconomics blog The Kobeissi Letter <a data-ct-non-breakable="null" href="https://twitter.com/KobeissiLetter/status/1836099965212594417" rel="noopener noreferrer nofollow" target="null" text="null" title="null">wrote</a>, “The market has never been so uncertain about a Fed interest rate decision in at least 15 years.”
Magazine: <a data-ct-non-breakable="null" href="https://cointelegraph.com/magazine/bitcoin-price-all-time-highs-donald-trump-election-sec-gary-gensler-felix-hartmann-hall-of-flame/" rel="noopener noreferrer nofollow" target="null" text="null" title="null">Bitcoin will ‘start ripping’ as Trump’s polls improve: Felix Hartmann, X Hall of Flame</a>
Additional reporting by Andrew Fenton.

Crypto poised for boost if Fed cuts rate by 50 bps, says hedge fund boss

Cointelegraph

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