Wharton Professor Calls for Urgent Federal Rate Cut
Wharton University School of Business professor Jeremy Siegel recently proposed the emergency rate cut of 75 basis points by the Federal Reserve. This comes while the digital money market and the world share market suffer huge damages due to the exaggeration of economic recession worries.
Crypto Markets and Traditional Stocks Hit Hard
Crypto environmental conditions experienced the downward $300 billion change in a day while main properties such as Bitcoin and Ethereum faced double-digit losses. Such an abrupt decay was a mirror of traditional markets like S&P 500 and Nasdaq which showed massive falls. The U.S. stock market was down by $1.93 trillion on Monday, August 5, which indicates the dubiousness of the situation.
Siegel’s Proposed Solution
According to Professor Siegel, such a rate cut by the Federal Reserve as 75bps would help to alleviate the liquidity crisis because the global markets are under the heavy crash of liquidity. In emphasizing his opinion, he is convinced that with the more liquid market of Wall Street, that would be possible for crypto markets to benefit from it and to be more stable when it comes to the price of the digital asset and having its valuation.
Institutional Interest in Crypto Funds
In fact, institutional participatory interest in funds linked to cryptocurrencies still holds quite a bit of strength despite the ongoing chaos. The spot Bitcoin exchange-traded funds (ETFs) brought in $ 1.3 billion in trading volume over the first 20 minutes of trading. While the data from ETFs tends to be delayed sometimes, it is hoped that investors will buy the dip which will in turn cause good results.
Polymarket Bets on Rate Cuts
On the Polygon-based decentralized forecasting platform named Polymarket, participants have staked $3.3 million in bets on the chances of the Federal Reserve interest rate being cut this year. Following it, the next best bet is that there will be three 75bps cuts between August and December. Notably, The Federal Open Market Committee has two crucial meetings in September and November that are severely important as the markets have already priced in a rate cut next month.
Market Reactions and Future Prospects
The central bank is supposed to issue three rate cuts before 2024 in order to tackle the emergency situation in the backdrop of ongoing global market retreats. At the same time, it is still hard to predict whether the Federal Reserve System is going to be this aggressive and what will cryptocurrencies do in response. Before last week’s recession worries, the crypto crowd had a favorable opinion of the rate cuts, per their usual approach of the market.
Conclusion
Amidst the turmoil of the global markets and cryptocurrencies, Wharton University of Pennsylvania Professor Siegel’s demand for a rate cut in an emergency situation by the FED is a wake-up call to the crisis that urgently needs to be addressed by the US central banck. Will the Federal Reserve adhere to Professor Siegel’s suggestion and what kind of reaction it will have on the financial market are yet to be known.
