We are so far surviving the liquidity crunch during the month of September fairly okay, especially Bitcoin. For each day we trade sideways, we get closer to October, at which point the macroeconomics environment turns more positive to crypto, particularly with an increase in U.S. Dollar liquidity.

On Wednesday, we are watching the U.S. Federal Reserve (Fed)’s decision on the U.S. Dollar interest rate, as the central bank’s Federal Open Market Committee (FOMC) meeting occurs. Just five days ago, the market was fairly confident that the Fed would only cut its interest rate by 25 basis points. Now, however, the market is pricing in a 50 basis point reduction with a 63% likelihood, while the 25 basis point cut has only a 37% likelihood.

This shift in consensus came after, Wall Street Journal’s chief economics correspondent, Nick Timiraos, also known as “Nikileaks” due to his excellent sources inside the Fed, argued that the size of the imminent rate cut is still up for debate.

If a 50 basis point cut is, in fact, what the Fed does on Wednesday, then crypto, in our view, will be extremely pleased by this, largely no matter the accompanied words by Fed officials, as the market has already shown its hand, as seen by Chart 1.

The question is how the crypto market will react to a merely 25 basis point rate cut. We expect a largely fairly limited reaction to the downside, due to the fact that the 50 basis points reduction has shown its genuine candidacy at the very last minute. In other words, we believe the crypto market has priced in a 25 basis point rather than 50 basis point cut.

Before we talk more about that, let us walk through the three most-meaningful pieces of crypto news in the past week.