Market participants They are eagerly awaiting the upcoming Federal Open Market Committee (FOMC) meeting, which is likely to take place play a key role in shaping the near-term outlook for Bitcoin and other digital assets. A potential interest rate cut is in the spotlight, with many traders and investors speculating on it for some time.

While the exact scale of the interest rate cut has not yet been confirmed, there is common expectation that the FOMC will either opt for a 25 basis point cut or a more significant 50 basis point cut. According to a prominent economist, the FOMC decision could lead to or give a boost to a news selling event for risk assets like Bitcoin.

Economist Predicts Massive ‘Sell the News’ Event

In the recent conversation The Block, Johns Hopkins University economist Steve Hanke shared his perspective on the potential impact of the expected U.S. Federal Reserve interest rate cut on the cryptocurrency sector. According to Hanke, the 25 basis point rate cut that many investors are currently expecting could ultimately lead to a “news sell” event for the broader cryptocurrency sector.

He explained that the market has already factored in the possibility of such a reduction and has been absorbed by the price action of several investment markets. In fact, once the cut is officially announced, the market reaction could be disappointing, potentially triggering a wave of cryptocurrency sell-offs.

Unlike the more anticipated 25 basis point cut, Hanke pointed out that the Fed’s 50 basis point rate cut has not yet been fully priced in. As such, a 50 basis point rate cut by the Fed could surprisingly “give the market a boost.”

What to expect in lightweight of the upcoming FOMC meeting

Inflation in the U.S. is starting to peaceful down, with Federal Reserve Chairman Jerome Powell noting last month that “the time has come” for interest rate cuts. Interest rate points are currently in a range of 5.25% to 5.50%, a 23-year high. In the context of the Federal Open Market Committee (FOMC), interest rate points refer to changes in the federal funds rate. The Fed raises or lowers interest rates primarily to stimulate economic growth and control inflation.

A Fed rate cut could theoretically provide a favorable environment for cryptocurrencies. Rate cuts mean that classic savings and fixed-income investments (such as bonds) offer lower yields, prompting risk-averse investors to turn to cryptocurrencies.

However, given the current market situation, it is impossible to predict how the market will react to a cut in interest rates. easier said than done at the time of writing. This is because the expected interest rate cut is one of the factors that drove Bitcoin’s rally earlier this year, leading to speculation about whether the interest rate cut is already priced into the market.

At the time of writing this text, Bitcoin is traded at around $60,000, up 3.5% in 24 hours.

Featured image created with Dall.E, chart from Tradingview.com