Markets and investors are preparing for the interest rate decision to be announced by the US Federal Reserve (FED) next Wednesday.

Although the general expectation is a 25 basis point discount, a 50 basis point discount is priced in at a large rate of 47%.

How Will the FED’s Decision Affect Bitcoin (BTC) and Risky Assets?

While it remains unclear whether the FED will make a 25 basis point or 50 basis point cut, economists said that there could be a possible selling wave in risky assets such as Bitcoin following the FED’s interest rate decision.

Speaking to The Block, Steve Hanke, an economics professor at Johns Hopkins University, said markets have likely priced in a 25 basis point Fed rate cut, which could lead to a “sell the news” event in riskier assets like BTC.

“A 25 basis point cut is already expected by the market, meaning the cut may fall short and trigger a sell-off in risky assets like Bitcoin.

“In contrast, a 50 basis point cut is not taken into account. If a 50 basis point cut occurs, it would probably move the market.”

Hanke added that risk assets, including Bitcoin, could face increased volatility in the coming months ahead of the US presidential election on November 5.

Apart from Steve Hanke, 21Shares research analyst Leena ElDeeb also evaluated the FED decision.

Leena ElDeeb, who stated that if the FED cuts interest rates by 50 basis points, this decision will move Bitcoin and the market, also warned investors.

“A more aggressive rate cut could shock markets as it would ring recession alarm bells. Investors will trade cautiously to counter market conditions that could hurt risk assets in the short term,” ElDeeb said.

FED Should Cut 50 Basis Points!

Speaking at a forum in Singapore, former New York Fed President Bill Dudley said the Fed should cut by 50 basis points, adding, “I think there’s a strong case for 50 basis points.”

Dudley had previously said that the Fed should begin cutting interest rates in July.

*This is not investment advice.