Tonight at 8:00 PM Italian time, the US Fed will make a crucial decision for the fate of the crypto market, expressing itself regarding the interest rate cut.
With a decrease in yield for bondholders, investors might return to considering riskier bets, supporting the growth of speculative assets.
This reasoning is not, however, so obvious, given that historically a rate cut by the Fed has led to a temporary drop in prices.
In the meantime Arthur Hayes, well-known founder of Bitmex, predicts the fall of central banks in favor of a change in the management of monetary policies.
Let’s delve into the topic below.
The Fed prepares for the first interest rate cut in the USA: a strong impact on the crypto market is coming
As mentioned, tonight’s Federal Reserve (Fed) meeting, which is preparing for an interest rate cut, will have a decisive impact on the future of the crypto market.
At 8:00 PM, the Federal entity will have to decide whether to implement a reduction of 25 or 50 percentage points on its government bonds, thereby reducing economic stimuli on money more or less aggressively.
According to the projections of the CME group, experts estimate a 61% chance of a sharp cut down to 475-500 basis points. Conversely, a softer landing at 500-525 basis points is estimated at 39%.
It is practically certain, therefore, that there will be a cut in premiums in the bond sector, but we do not yet know with certainty of what magnitude.
Normally, the choice of a monetary policy of “allentamento quantitativo” (quantitative easing), which tends to increase the money in circulation through debt, favors the crypto markets.
The Fed injects liquidity into speculative markets, taking away part of the yield from bondholders in a framework of stability and control of inflation.
Lower rates are associated with the search for yield on more speculative products, such as those typical of the crypto and stock sectors.
Investors would therefore theoretically be discouraged from parking their money in American Treasuries, in favor of other more remunerative options.
This translates into a rise in the prices of Bitcoin and the main US stock indices.
Obviously, these discussions must be contextualized with macro data such as the stability of the country, the sovereignty of the currency, and the labor market.
In any case, it is undeniable that tonight’s decision by the Fed will have repercussions on the future of the crypto market for the coming months.
If from here a liquidity training cycle begins without particular surprises, we can consider the event as a good omen for the return to the bull market.
The historical impact of the Fed’s rate cut on financial markets
Tonight will be the first rate cut by the Fed since March 2020, when the central bank lowered yields by 100 basis points in the midst of the Covid pandemic.
On that occasion, the crypto market recorded one of the most violent crashes in history, with BTC dropping by 38.9% in the same month.
Going back in time, we can observe how historically a Fed rate cut is typically associated with an instantaneous price bear.
Taking as an example the S&P500, after the rate cut in September 2007, the market faced a significant crash.
In that case, a reduction of 50 basis points triggered the beginning of a bear phase for the index, which within a year lost half of its value
Same outcome in January 2021, when the Fed lowered rates by 100 points leading to a bear market.
It is important to understand that the more quantitative easing occurs with a marked maneuver, the more the markets react poorly.
This is because the stock market perceives the fact as the inability of the central bank to maintain a stable situation.
Attention therefore because the crypto market tonight could take a hit if Jerome Powell makes a strong decision.
We emphasize, however, how liquidity slowdowns, although historically triggering an initial drop in prices, ultimately end up favoring a bullish scenario.
Let’s take as an example the golden period from April 2009 to October 2025, when rates remained close to zero on the target of 0.15%.
In those years the S&P500 increased by 150% rising from 800 to 2000 dollars without particular graphical setbacks.
The hope is therefore that the monetary framework in USA will once again favor risk-on sectors such as crypto, with few opportunities on the bond front.
At the same time, the process by which we move towards a similar outlook must be as soft as possible, avoiding short-term imbalances that translate into red candles.
Today is likely the most important date of the year for Bitcoin and the entire crypto market.
Arthur Hayes and the end of the era of central banks: the future of crypto
As the Fed prepares for the rate cut, Arthur Hayes expresses his concerns about the short-term effect on crypto market prices.
The Chief Investment Officer of Maelstrom and co-founder of BitMEX recently gave an interesting interview in which he addresses the impact of the macroeconomic event.
According to Hayes, the prices of speculative securities will face an instant crash, with inflation returning to reign supreme, implying further interventions from above.
Here are his exact words during the Token2049 conference in Singapore:
“The rate cut is a bad idea because inflation is still a problem in the United States, with the government contributing more to sticky price pressures. If you make borrowing cheaper, it adds to inflation”.
Furthermore, the billionaire investor believes that the Fed’s rate cut will weaken the dollar, leading it to a new bear against the Japanese yen.
In fact, the Japanese central bank (BOJ) is going through an opposite phase in which it is moving towards an increase in rates.
The USD/JPY chart could therefore register another plunge after losing about 12.5% in 3 months. Let’s expect a drop in the Forex index to 135 points in the event of a significant rate cut. Again, Hayes’ words on the subject:
“The second reason is that the interest rate differential between the United States and Japan narrows with rate cuts. This could lead to a strong appreciation in the yen and trigger the unwinding of yen carry trades”.
A similar scenario, according to Hayes, would determine the crisis of central banks and the end of their era of dominance over the fate of the markets. The Fed will no longer have such a strong impact on the prices of stocks and crypto, having now lost control of the money supply.
Their monetary policies are starting to become irrelevant, as argues the Scottish market strategist Russel Napier.
It is likely that in a short time we will find ourselves with rates close to zero in the United States from the current 525-550, but perhaps it will not have as bullish an influence as hoped.
In any case, Hayes argues that the crypto market awaits a bright future, where digital assets become the only solution to escape the rotten system of global debt.
Kraken’s idea on the Fed’s rate cut
Even the cryptocurrency exchange Kraken has commented on the much-anticipated decision by the Fed regarding the rate cut.
Kraken confirms that the policy that will be adopted from now on will have a significant effect on the price action of the crypto market in the short term.
According to the hypotheses of Thomas Perfumo, Head of Strategy of the exchange platform, today’s price trend will be slightly volatile until the Fed speaks.
Everyone is waiting to find out which path will be adopted, while the odds are in favor of an aggressive cut of 50 points.
Here is what the cryptographic expert reported:
“It is no secret that the monetary policy of central banks is the most significant catalyst for today’s macro-financial markets. If you combine the enormous impact of monetary policy with the increasing general correlation between crypto assets and risky assets in recent months, you get the ideal conditions for price movements across all markets. In the short term, all eyes are on the decision of the US Fed on interest rates. Markets remain cautious until we have clarity on how deeply they will decide to cut rates, with current expectations leaning towards a 50 basis point cut.”