Traders Warn of Selling Pressure Ahead of Rate Cut

Bitcoin (BTC) is trading above $60,000 as investors around the world await the U.S. Federal Open Market Committee (FOMC) meeting, where Chairman Jerome Powell is set to announce interest rate cuts.

BTC is up nearly 4% in the past 24 hours to trade just above $60,300, taking its weekly gains to over 7%. Ether (ETH), BNB Chain’s BNB token, and dogecoin (DOGE) are up around 1%, while XRP, Cardano’s ADA token, and Toncoin’s TON are posting slight losses.

The CoinDesk 20 (CD20) index, which comprehensively measures the crypto market, is gaining 1.1 percent.

The FOMC is expected to announce its statement and interest rate decision at 14:00 today. The decision to reduce borrowing costs increases bullish sentiment as cheap access to the dollar accelerates growth in riskier sectors.

Fed funds data show investors are pricing in a 67% chance that rates will fall to 5% from the current two-decade high of 5.5%.

Traders in Polymarket are split between the possibility of a 100 basis point (bps) and 125 basis point cut, with a 31% chance of both scenarios occurring, according to the contract.

However, some say a 50 basis point cut could trigger selling pressure as it signals a worrying situation for the economy.

“The size of the rate cut is important because it could lead to different market reactions,” said Alice Liu, head of research at CoinMarketCap. “While a 25 basis point cut would be positive for markets, a 50 basis point cut could signal a recession and trigger a major correction in risk assets.”

“If the rate cut is seen as a response to weakening economic conditions, it could raise concerns about future earnings and potentially lead to a short-term pullback in crypto assets.”

“Historically, the fourth quarter was a strong period for bitcoin. Bitcoin has seen an average price increase of 90.33% in the fourth quarters of the last decade.”

Speaking to Bloomberg at the Token 2049 conference in Singapore, SkyBridge Capital founder Anthony Scaramucci says bitcoin could reach record highs as interest rates are cut and regulatory clarity is gained. Scaramucci says he expects a 150 basis point rate cut at the next Fed meeting.