A cut in the Federal Reserve's interest rate could be positive for risk assets, including cryptocurrencies, says Joe McCann, founder and CEO of the crypto hedge fund Asymmetric.
Potential Fed Rate Cut
Joe McCann told Cointelegraph that it is a 'coin flip' on whether the rate cut will be 25 or 50 basis points as the Fed is set to reduce rates from their current 24-year high of 5.5% for the first time since March 2020. Historically, outcomes priced at a 70% chance in the Fed futures market succeed 100% of the time.
Impact on Crypto Market
McCann believes that a 25 basis point cut might negatively impact the crypto markets: '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.' However, a 50 basis point cut would likely be positive for risk assets like cryptocurrencies.
Economic Conditions and Arguments
McCann noted that previous Fed rate cuts occurred during emergencies, such as the 2008 financial crisis and the 1987 Black Monday crash. However, the current 'booming' economy with 3% GDP growth is different from those periods, making the potential rate cut less dramatic. He added that a rate cut stimulates growth into 2025 and reduces net interest payments for the US Treasury.
While opinions on the Fed rate cut vary, the potential for a 50 basis point cut could create positive conditions for the crypto market, supporting growth and reducing potential risks.
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