- Wharton's Jeremy Siegel called on the Federal Reserve to urgently cut the federal funds rate by 75 basis points.
- Bitwise CIO Matt Hougan took a more measured approach and said an emergency rate cut was unlikely.
As global financial markets have fallen sharply over the past two trading days, attention has turned to the Federal Reserve.
The Fed kept interest rates unchanged at 5.25% to 5.5% at its meeting last week , and most industry observers predict that the Fed will cut interest rates by 50 basis points at its September meeting. However, a weaker-than-expected U.S. jobs report, coupled with a variety of macroeconomic factors in recent days, has led some to call for an emergency rate cut.
As of press time, the U.S. index is down about 2.4%, and Bitcoin, the largest cryptocurrency by market value, is down more than 8%. The drop in cryptocurrency market value over the past 24 hours is the largest single-day drop since January 2022 .
Jeremy Siegel on Monday called on the Federal Reserve to urgently cut the federal funds rate by 75 basis points, and cut it by another 75 basis points in September. The current federal funds rate should be between 3.5% and 4%, the professor emeritus of finance at the Wharton School of the University of Pennsylvania and chief economist at WisdomTree told CNBC .
"If they grow as slowly on the way down as they did on the way up, which, by the way, is the first policy mistake in 50 years, then our economy is not going to fare well," Siegel said.
Nigel Green of the DeVere Group called for an immediate 25 basis point rate cut to avoid a recession. He said in a note that the Fed "needs to act now ... or risk a real and far-reaching hard landing."
Bitwise CIO Matt Hougan took a more measured approach and said an emergency rate cut was unlikely.
“Powell is being very cautious and it’s an election, so the chances of any emergency seem slim,” Hogan told The Block. “But we could see a 50 basis point increase in rates in September and more than 100 basis points by the end of the year. We are entering a new cycle of global liquidity, just like the last one.”
Hogan also recalled March 12, 2020, the day of the coronavirus-induced market crash, when the Dow Jones Industrial Average fell 2,400 points and the price of Bitcoin plummeted nearly 40%.
“But guess what, it turned out to be a historic buying opportunity. Bitcoin and bonds went up over 1,000% over the next year as central banks responded and printed money their way out of the crisis,” Hogan said, noting that this looked more like an opportunity than something to cause panic.
Twelve spot bitcoin exchange-traded funds saw outflows of $237.45 million on Friday, the largest daily outflow since May 1 ($563.77 million).
The GMCI 30 index, which covers the top 30 cryptocurrencies, fell 9.6% in the past 24 hours to 102.98. This is the lowest level the index has reached since early February.
“The Fed stands ready to implement policy to achieve its dual mandate of price stability and full employment,” Brian Rudick, senior strategist at cryptocurrency market maker GSR, told The Block in an email. “Therefore, if the Fed determines that current policy is restrictive and makes an emergency rate cut during the meeting, this will be positive for risk assets, including Bitcoin and other cryptocurrencies. Not only does this show that the Fed is willing to act, but the price of Bitcoin has shown a strong positive correlation with global liquidity since its inception.”
