Is it Time to Sell Bitcoin? Economist Forecasts Huge ‘Sell The News’ Occurrence

Market participants are eagerly anticipating the upcoming Federal Open Market Committee (FOMC) meeting, which is poised to play a crucial role in shaping the short-term outlook for Bitcoin and other digital assets. The focus is on the potential for an interest rate cut, with many traders and investors speculating about its implications.

While the exact size of the rate cut remains unconfirmed, there is widespread anticipation that the FOMC could choose either a 25-basis point reduction or a more significant 50-basis point cut. A noted economist suggests that the FOMC’s decision could trigger a ‘sell-the-news’ event for risky assets like Bitcoin or potentially provide them with a boost.

In a recent discussion with The Block, economist Steve Hanke from Johns Hopkins University shared insights on how the anticipated interest rate cut by the U.S. Federal Reserve could impact the cryptocurrency sector. Hanke believes that a 25-basis-point rate cut, widely expected by investors, might lead to a ‘sell-the-news’ scenario across the broader crypto industry.

He noted that the market has already factored in the possibility of such a reduction, which has been reflected in the price movements of various investment markets. Consequently, once the cut is officially announced, the market’s response could be subdued, potentially prompting a wave of sell-offs in cryptocurrencies.

In contrast, Hanke highlighted that a 50-basis-point cut by the Federal Reserve, not entirely priced into the market yet, could unexpectedly boost market sentiment.

Looking ahead to the upcoming FOMC meeting, inflation in the U.S. appears to be moderating, prompting Federal Reserve Chair Jerome Powell to suggest the need for rate cuts. Currently, rate points stand at 5.25%-5.50%, the highest level in 23 years. Rate points, in the context of the FOMC, denote changes in the federal funds rate, which the Fed adjusts to stimulate economic growth and manage inflation.

A reduction in the Fed’s interest rates could create a conducive environment for cryptocurrencies in theory. Lower rates on traditional savings and fixed-income investments may drive risk-averse investors towards cryptocurrencies seeking higher returns.

However, predicting the market’s response to a rate cut amid current conditions remains challenging. The expected rate cut was a contributing factor to Bitcoin’s earlier surge this year, leading to speculations on whether the cut is already priced in.

At the time of writing, Bitcoin is trading around $60,000, showing a 3.5% increase in the last 24 hours.