Wharton professor Siegel urges 75bps rate cut as crypto plunges

Wharton professor Jeremy Siegel called for an emergency rate cut by the Fed as liquidity is being pulled from cryptocurrencies and global markets amid recession concerns.

Cryptocurrency markets have lost over $300 billion in 24 hours, with assets like Bitcoin (BTC) and Ethereum (ETH) seeing double-digit declines alongside traditional markets like the S&P 500 and Nasdaq. The U.S. stock market also continued its losses amid recession fears, losing $1.93 trillion when trading opened on Monday, August 5.

Wharton’s Siegel called on the Federal Reserve to implement an emergency 75 basis point rate cut to avert a global liquidity crunch.

In theory, Siegel’s proposed Fed pivot could provide much-needed relief for U.S. financial markets. The extra liquidity on Wall Street could flood crypto markets, stabilizing prices and softening troubled digital asset valuations.

Institutional vehicles are showing an appetite for crypto-backed funds. Spot Bitcoin exchange-traded funds saw $1.3 billion in volume in the first 20 minutes of trading. While ETF data is typically incremental, spot BTC ETF investors can buy the dip and see positive inflows.

Polymarket users placed $3.3 million on Fed rate cut bets

Meanwhile, bettors on Polymarket, a decentralized prediction market based on Polygon, have placed $3.3 million in bets on Fed rate cuts this year.

The second-largest bookmaker is expecting three 75 basis point cuts between August and December. The Federal Open Market Committee calendar shows meetings in September and November, respectively, and markets are pricing in a rate cut next month.

Three cuts before the end of 2024 would require the Fed to announce an urgent policy change amid global market declines. However, it was unclear whether the apex U.S. bank would adopt such an aggressive pivot or how crypto markets would react to the funds rate change.

Before global recession concerns hit markets last week, crypto advocates had generally perceived the rate cut as a positive development.