The US employment report released on Friday appears to have cleared the way for the Federal Reserve (Fed) to start lowering interest rates, with the first move likely to happen next week.

However, if the Fed cuts interest rates by 50 basis points (bps) on September 18, the so-called positive liquidity easing cycle could get off to a negative start for risk assets, including cryptocurrencies, according to 10x Research.

Interest rate movements are expressed in “basis points,” which is equal to 1/100 of a percentage point, and central banks such as the Fed typically favor rate changes of 25 basis points. However, larger steps can be taken when there is a sense of urgency.

For example, the Fed made increases of 50 and 75 basis points many times in the 2022 tightening cycle to control inflation, which caused risk aversion in financial markets.

A 50 basis point rate cut next week could be a sign of growing economic concerns or falling behind in the fight against a looming economic slowdown, which could lead investors to reduce their exposure to risky assets like bitcoin (BTC) and stocks.

“A 50 basis point cut from the Fed could signal deeper concerns for markets, but the Fed’s primary focus will be on mitigating economic risks, not managing market reactions,” Markus Thielen, founder of 10x Research, said in a note to clients on Monday. . Thielen correctly predicted BTC’s $70,000 rally in the first quarter of 2023.

At press time, the Chicago Mercantile Exchange’s (CME) FedWatch tool showed an almost 30% chance that the Fed would cut interest rates by 50 basis points next week to a range of 4.75%-5%.

“The probability of a 50 basis point cut is only 29%, which is at odds with our view and general expectations. The sentiment that the Fed missed signs of weakness in the labor market and was caught off guard in July is increasingly voiced,” Thielen added.

Thielen’s view is also consistent with the general view of traditional market experts. “The Fed doesn’t want to start with a 50 basis point cut because, frankly, the economy right now doesn’t warrant them panicking,” macro trader Craig Shapiro said on platform X.

Shapiro stated that the liquidity-dependent market will want the Fed to start with a 50 basis point interest rate cut and that there will be corrections in the markets until the central bank turns to larger cuts.

Shapiro said, “We are back in this situation. The Fed will continue to correct risk assets until it makes the cuts it wants. We need to find the level at which the Fed will step back, but given the current state of the economy and risk asset prices (equities, credit spreads, etc.) “With ) still at such high levels and economic data continuing to grow slowly, I fear these levels could be significantly lower,” he said.

Based on historical data, the beginning of a rate-cutting cycle does not always have a stimulating effect on asset prices, regardless of the size of the initial move.

It should be noted that the expected Fed easing is seen as one of the main factors behind BTC’s rise from the $20,000 level in January 2023, which raises the question of whether the rate cut is already priced in.