Fed's interest rate cut: "Relief" or "big mistake"?

The market is waiting for the Federal Reserve of America (Fed) to cut interest rates next week to stimulate the slowing economy. This move has excited many cryptocurrency traders as they expect new liquidity to flow into the market. However, not everyone agrees – some experts warn that this could be a destructive move for the global economy.

Peter Schiff: "Cutting down the whales interest rates is a serious mistake"

Economist, investor, and famous "gold supporter" Peter Schiff bluntly stated that the Fed is making "a colossal mistake." In a post on X, he pointed out that the movements of gold and silver have clearly reflected signals from the market.

Schiff wrote:

"Silver prices have just surpassed 42 USD. Gold is preparing to set a new historical peak. The precious metal market is ready to explode. This is an unmistakable signal that the Fed's preparation for cutting down the whales is a serious mistake."

According to Schiff, this decision could mark the beginning of a series of cutting down the whales, potentially bringing the Fed back to a strong quantitative easing (QE) policy and controlling bond yields. He warns that the USD risks losing its position as the global reserve currency as confidence in the Fed weakens.

Schiff has long criticized the overly loose monetary policy, arguing that it will stimulate inflation and pose risks to the USD. He emphasized that this could be the most destructive mistake of the Fed since Alan Greenspan "rescued" the market after the crash of 1987.

Why are cryptocurrency traders jubilant?

Contrary to Schiff's concerns, risk asset traders – including crypto – welcomed this news with enthusiasm. Low interest rates mean cheap capital, and loose financial conditions, which usually drive up the prices of highly volatile assets like Bitcoin, Ethereum, and altcoin.

According to the CME's FedWatch tool, 93.4% of the market expects the Fed to cut interest rates. This optimistic sentiment has stimulated capital flows into Bitcoin and altcoins, with many believing that this will be the catalyst for a new bull cycle.

Schiff believes that this is even more dangerous, as "cheap money" often causes investors to abandon safe haven channels to plunge into risky assets.

Support for the weak labor market

Although Schiff warns of consequences, many large organizations such as Goldman Sachs, BlackRock, and a survey of 107 economists from Reuters believe that cutting down the whales is necessary to support the weakening labor market and prevent recession.

The chief economist of Goldman believes that the Fed will carry out a series of small cuts, based on poor employment data and cooling inflation. However, some other experts are concerned that loosening too quickly could trigger inflation again or put pressure on the USD – somewhat in agreement with Schiff's viewpoint.

David Zervos, the strategist from Jefferies, even suggested that the Fed may need a strong cut of up to 75 basis points, but he also acknowledged that "cheap money" in the long term could be detrimental, driving up prices and weakening the monetary foundation.

The debate remains open

The Fed's interest rate cuts are becoming the focal point of debate. Peter Schiff sees it as kindling for a crisis – leading to a series of interest rate falls, uncontrolled inflation, and a weakening USD. Meanwhile, the cryptocurrency trading community views this as a golden opportunity for a new growth phase.

The traditional economic community remains divided: one side wants to support jobs, while the other fears inflation returning.

Whether it is a "big mistake" or a "timely rescue", the upcoming decision by the Fed will certainly leave a lasting mark, not only on the traditional economy but also on the cryptocurrency market.

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