Why You Shouldn’t Sell Your Crypto Here Because of Rate Cut

Everyone was scared when FED cut rates by 50 bps calling for a recession.

In this thread, we'll explore why you shouldn’t sell your crypto here because of the cut.

#AlgoRAIseTheBar.🧵👇

It’s been a week since the Fed kicked off the long-awaited rate-cutting cycle with a 50 bps cut instead of just 25, sparking predictions of a market crash.

But aren’t rate cuts supposed to be good? So why the panic, and is it justified?

We all know that rate cuts are generally good for risk-on assets.

It’s basic economics: lower borrowing costs + low bond yields (making them less attractive) + the need to hedge against inflation = significant increases in asset prices.

However, the problem is the size of the initial rate cut.

Normally, in a healthy economy, the Fed would take things slowly by initiating a standard cut of 25 bps.

Cutting 50 bps all at once makes it look like they are panicking, most likely they think that the labor market is much worse than it looks, which is why they need to lower rates quickly.

But in that case, the economy is already in a bad state, and they won't be able to recover in time.

Simply put, recession. Even if the rate cuts have started, the market will crash before the situation improves.

Worse still, there are historical precedents for this scenario.

The last two times the Fed started a rate-cutting cycle with 50 bps were in 2001 and 2007.

In 2001, the Nasdaq continued to fall for over a year and a half after the first cut, dropping nearly 70%.

2007 was similar, initial scam pump followed by more than a year of pain.

If you thought the bottom was in when the cuts started in 2001 or 2007, your portfolio would be wiped out quicker than a box of Adderall in SBF’s penthouse.

So it’s easy to see why people are worried now.

But could this time be different?

In fact, it could, and there are 3 main reasons why you shouldn’t sell your crypto right now because of the cuts.

First, the macro environment we’re in is very far from anything resembling a recession.

Inflation, job data, and GDP, all of these are moving in healthy direction.

Monetary policy is extremely tight right now. The difference between the Fed funds rate and the 2-year yield shouldn't be so significant.

Thus, the 50 bps cut is just an adjustment to keep pace with the bond market, not a panic move.

Finally, there's no reason for 2007 and 2001 to directly influence crypto since it didn’t exist then.

While crypto may trade like a high-beta version of tech stocks now, we can’t assume this applies to every environment.

I'm not saying that we’ll have a crazy altseason if a 2007 scenario occurs, but simply that we don’t know how crypto (especially BTC and ETH) would react.

It could be better than stocks or worse.

The point is, keep an open mind.

So, to sum up, the macro environment doesn’t look recessionary, and there’s no reason to panic right now.

We’re heading into an election, which will influence crypto far more than whether the first cut was 50 or 25 bps.

Q4 could be amazing.

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