BitMEX co-founder Arthur Hayes has reiterated his stance on the incoming interest rate cut from the Federal Reserve, terming it a “bad idea.”with CoinDesk on the sidelines of the Token2049 event, Hayes echoed his concern that risk assets like cryptocurrencies could crash shortly after the Fed rate cut.The Fed will announce its interest rate call later today. Since 2020, the central bank has hiked its interest rate to curb inflation post-COVID.
Hayes noted that while the incoming rate cut would ease the liquidity level in the country, it would trigger an inflation problem. He added that this could strengthen the Japanese yen and cause a downtrend for risk assets denominated in U.S. dollars, including crypto assets. “The rate cut is a bad idea because inflation is still an issue in the U.S., with the government being the biggest contributor to the sticky price pressures. If you make borrowing cheaper, it adds to inflation,” the BitMEX co-founder said.the Fed’s rate cut to a “Sugar High,” stressing that the interest reduction will have a short-term impact on the crypto market. He compared this with the short-term effect of sugary food, which gives a brief energy boost.
Analysts expect the Bank of Japan to increase interest rates shortly as the Fed downsizes its rate, hopefully to regulate the USD/JPY market.The Fed’s current interest rate is between 5.25% and 5.5%. The BitMEX co-founder believes the central bank will drop this figure to zero. “The initial reaction is going to be negative and the central bank’s response will be to do even more to stem the crisis. So, I think that cutting rates is a bad idea, but they’re going to do it anyway, and so they’re going to go to zero quickly,” Hayes said.One Weekly Email Can Change Your Crypto Life.Disclaimer: Information found on CryptoPotato is those of writers quoted. It does not represent the opinions of CryptoPotato on whether to buy, sell, or hold any investments.