According to a portfolio manager, market players are getting a little too excited about an aggressive Fed interest rate decrease, which might be risky.
A portfolio manager believes the US Federal Reserve might not reduce interest rates as much as market players expect.
However, the larger cryptocurrency market is still optimistic about the September rate reduction.
In a Bloomberg interview on August 14, portfolio manager Justin Elliot of Caldwell Investment Management stated, “The market pricing in 100 basis points of cuts by the end of the year is a potential risk, and it is potentially getting ahead of itself; there is nothing to support that thesis.”
The Question Marks the Fed’s “level of Aggression.”
Although Elliot notes that the economy is doing “fairly well” and that retail sales are still “fairly strong,” he cautioned market players not to get too comfortable that inflation will continue to rise.
“If you’re of the view that the economy will continue to soften and ease up from here, then we think there is a risk that even the new outlooks might be a little too optimistic and could potentially see some estimate cuts as the year goes on.”
Elliot also stated that there is no evidence to back the “level of aggression” that the Fed is likely to exhibit to lower interest rates, a belief that many Bitcoin BTC$58,523 investors hold that the commodity must rise over its current all-time high of $73,679.
Interest rates are essential to Bitcoin because they can drive investors away from the cryptocurrency by making safe investments like bonds and term deposits more alluring.
Lower rates, however, frequently encourage investors to look for riskier assets, such as Bitcoin.
Elliot’s remarks follow the July Consumer Price Index (CPI) data released by the US Bureau of Labor Statistics (BLS) on August 14. The data indicates that annualized consumer price increases were 2.9%, the lowest rate increase since 2021.
According to CoinMarketCap data, after the news, the price of Bitcoin dropped by about 3% and fell below the critical $60,000 threshold to $58,897.
The fall in Bitcoin was probably “caused by expectations of a more dovish rate cut,” according to Eliézer Ndinga, 21Shares’ head of strategy and business development for digital assets.
The Cryptocurrency Market is Still Optimistic.
The larger cryptocurrency market, however, is still holding out hope for the long-rumored September rate decrease.
The argument for Fed rate cuts will be strengthened by the continued slowdown in US inflation, according to ETC Group chief of research Andre Dragosch’s August 14 X post.
The release of the CPI figures is good but somewhat below expectations. The founder of MN Trading, Michael van de Poppe, added, “The likelihood of a rate cut for the FED is approaching, through which the likelihood of QE & upward price action for Bitcoin has increased.”
However, Grayscale’s head of research, Zach Pandl, recently stated to that “rate cuts are likely a necessary condition for sustained weakness in the US dollar and fodder for Bitcoin to retest its all-time highs.”
Thankfully for cryptocurrency investors, Pandl continued, “The incoming data may be a signal for lowering rates sooner rather than later.”
