The crypto market has, for a while now, been pricing a potential 25 basis points (bps) rate cut at the October 29 Fed meeting. This has raised the possibility of a crash occurring after the Fed meeting if this turns out to be a ‘Sell the news’ event.
How The Crypto Market Could React To The Fed Meeting
Crypto analyst Ali Martinez stated that the projected 25 bps rate cut is already priced in. This means that a rate cut following the October 29 meeting could end up being a ‘sell the news’ event for the market.
This would be similar to how the crypto market reacted after the Fed made the first rate cut of the year at the September FOMC meeting. As crypto pundit NekoZ pointed out, the market quickly lost $60 billion after the rate cut last month.
However, he noted that the market had added over $270 billion at the start of that September, just before the Fed cut rates. In line with this, NekoZ remarked that rate cuts triggered the shakeout, but overall liquidity returned to the market.
As such, this could again play out for the crypto market following the October 29 Fed meeting. Notably, the Bitcoin price had surged to a new all-time high (ATH) above $126,000 at the start of the month as the market priced in another 25 bps Fed rate cut. This is similar to how the flagship crypto had also surged to a new ATH just before the Fed made the first rate cut last month.
However, in the long term, the Fed rate cuts could serve as a catalyst for a sustained bullish momentum. Standard Chartered analyst Geoff Kendrick highlighted the rate cuts as one of the factors that could contribute to BTC’s rally to $200,000 by year-end.
China Deal And End To Government Shutdown Could Spark A Rally
A China deal and an end to the ongoing U.S. government shutdown could spark a rally for the crypto market. The market is currently facing a bearish sentiment due to the rising trade tensions between the U.S. and China.
As such, a recovery may be on the cards if both countries can reach a trade agreement. U.S. President Donald Trump has confirmed that he will meet with China’s President Xi Jinping at the APEC Summit on October 31.
The meeting will take place just before the proposed 100% tariffs on China go into effect on November 1 and could prevent trade tensions from escalating into a full-blown trade war. Meanwhile, the U.S. government shutdown, which has lasted over three weeks, has created market uncertainty, which is why the crypto market could bounce if the Senate passes a funding bill to reopen the government.
