Is A Fed Rate Cut Ahead? Experts Warn It May Escalate Market Bloodbath

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As a seasoned financial analyst with over two decades of experience navigating market turbulence and economic downturns, I find myself cautiously treading the current global financial landscape. The intensifying speculations surrounding potential Federal Reserve rate cuts have set off alarm bells for me, given my past encounters with similar situations.

Discussions about possible interest rate reductions by the Federal Reserve have grown more intense due to worldwide economic chaos. Notable financial experts caution that such a decision might result in serious consequences, possibly contributing to another crypto market collapse. It’s been reported today that the U.S. Fed has convened an emergency meeting to discuss potential interest rate cuts.

Expert Warnings Against US Fed Rate Cut

Scott Melker, also recognized as The Wolf Of All Streets, pointed out a possible drawback of a Federal Reserve shift in policy. In other words, he expressed that the anticipated Fed pivot could be unfavorable, particularly when it’s a response to market instability or downturns. This implies that lowering interest rates by the Fed, which is generally considered a means to boost the economy, may exacerbate the cryptocurrency market crash.

In an analysis previously provided, Melker clarified that the widespread assumption of a profitable market shift following a Federal Reserve change in policy, i.e., a pivot towards lower interest rates, is actually incorrect. He underscored that, based on past trends, the market tends to experience a downturn or correction following such a Fed pivot.

Additionally, Melker’s study suggests that interest rate reductions usually occur before major market drops. If this pattern holds true, it might signal potential difficulties for cryptocurrencies that are already under heavy selling pressure. Notably, today has seen over $1.1 billion worth of liquidations initiated within the crypto market.

Furthermore, approximately $1 billion worth of positions were liquidated from long holders, potentially intensifying the recent market drop due to fear, apprehension, and skepticism (FUD). Notably, Goldman Sachs has increased the likelihood of a U.S. economic recession within the next year from 15% to 25%. Bitcoin skeptic Peter Schiff has also offered his perspective on these developments.

He predicted that the Federal Reserve might cut rates mid-meeting to stabilize collapsing stock and labor markets. However, Schiff warned that such measures would fail to revive the economy or employment but could exacerbate inflation. Moreover, the economist hinted at a recession if a Fed rate cut is announced anytime soon.

As an analyst, I’m sharing my perspective based on a recent interview with Peter Kinsella from UBP. He believes that an emergency rate cut by the Fed is unlikely due to potential panic it might trigger in the market. Instead, he proposes that if the U.S. Federal Reserve merely signals a September rate cut, this could effectively address the immediate issue of the market downturn without causing unnecessary alarm.

U.S. Fed Emergency Meeting

It appears that the cryptocurrency sector is exhibiting troubled signs, with Bitcoin’s price diving by 18% over the last five days. Simultaneously, the S&P futures have decreased by 4%, indicating a broader market volatility. In reaction to these occurrences, the U.S. Federal Reserve has scheduled an urgent meeting, fueling speculation about a possible interest rate reduction.

As an analyst, I’ve observed a notable depreciation in the Japanese yen (JPY), dropping by approximately 13%. Similarly, the markets of Taiwan and South Korea have dipped nearly 10%. These international market declines contribute to the growing financial uncertainty worldwide. This added complexity is likely influencing the Federal Reserve’s decision-making process regarding interest rate cuts. Predictions suggest a potential 50 basis points reduction following today’s emergency meeting.

Under these circumstances, a potential decrease in the Federal Reserve’s interest rates might cause increased turbulence within the cryptocurrency sector. Yet, CNBC anchor Ran Neuner presented an opposing viewpoint, viewing this juncture as significant. He underscored its significance by stating, “This is the moment we’ve been anticipating.” Furthermore, he highlighted the need for immediate action from the Fed to avert a financial catastrophe that could eclipse the severity of the 2008 crisis.

Currently, the VIX Index, known as Wall Street’s “fear gauge,” has shot up above 50 for the first time since April 2020. This substantial increase indicates increased market turbulence and investor worry, mirroring levels seen at the start of the Covid-19 pandemic.

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2024-08-05 16:06