NAIROBI (CoinChapter.com)—Wall Street is filled with speculation about a potential emergency rate cut by the Federal Reserve due to increasing recession concerns. Traders and investors are closely monitoring economic indicators, anticipating that the central bank may take swift action to stabilize the economy.
According to swap market data reported by Bloomberg, there is now a 60% probability of a 25-basis-point rate cut next week. This expectation arises amid broader financial market shifts, with U.S. Treasury yields experiencing declines.
Polymarket Bets Point to Imminent Fed Action
Polymarket data indicates a 28% chance of an emergency rate cut by the Fed, with 11% predicting a more substantial cut, reflecting growing anticipation among bettors. These odds highlight investor concerns about the Fed’s readiness to act.
The bond market reflects this shift, with U.S. Treasury yields dropping to their lowest levels in a year. The 2-year Treasury note fell 16 basis points, and the 10-year note dropped 10 basis points.
This panic follows a weak jobs report last Friday, triggering the Sahm Rule, a key recession indicator. Payroll growth slowed unexpectedly, and unemployment surged, raising questions about the Fed’s timing in adjusting monetary policy.
Wharton professor Jeremy Siegel called for an emergency 75-basis-point rate cut and suggested another in September.
Siegel warned of negative market reactions without such measures and argued that interest rates should be 175 basis points lower. Moreover, Nobel laureate Paul Krugman supports an emergency cut, citing a panicked stock selloff.
Will the Fed Break Tradition?
The Fed typically adjusts rates during scheduled meetings, but exceptions exist. It took emergency actions during the COVID-19 pandemic and the dot-com crash.
Currently, markets anticipate a series of cuts through 2024. The CME FedWatch tool shows an 83% chance of a 100-basis-point cut by year’s end, up from 0.2% a week ago.
Goldman Sachs economists raised recession odds to 25%, citing a need for rapid cuts. They argue the Fed’s focus on inflation has kept rates too high, urging immediate action to support the economy. This view reflects broader concerns that delaying cuts could worsen economic conditions.
Bitcoin Rebounds on 4-Hour Chart as Exchange Reserves Decline
Bitcoin (BTC) has demonstrated resilience, rebounding from recent lows amid declining exchange reserves. Currently trading near $54,340, BTC has seen a 1.66% uptick, signaling a potential bullish momentum.
Bitcoin rebound comes as Bitcoin exchange reserves across all platforms have decreased to $157.5 billion as of early August, indicating reduced selling pressure and a possible shift in market sentiment.
Furthermore, the 24-hour trading volume surged by 250.94% to nearly $109 billion. This increase in volume can signify growing investor interest and potentially signal a turning point, as high volumes often precede price movements.
The 4-hour chart reveals that Bitcoin found support near $49,130, coinciding with the 0.236 Fibonacci retracement level from its high near $66,000. The price has since climbed above the 0.5 Fibonacci retracement level around $54,400, suggesting a bullish reversal if the level holds.
The RSI at 33.44 suggests BTC is nearing oversold conditions, supporting the potential for further upside.
Additionally, the MACD indicator shows narrowing lines, hinting at a bullish crossover if momentum persists. For sustained bullish momentum, BTC needs to surpass the 0.618 Fibonacci level near $55,630. Clearing this hurdle could pave the way toward the next resistance level, around $57,370, aligned with the 0.786 Fibonacci level.
