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Fed Rate Cut Optimism Won’t Prevent US Recession, Will Nvidia Trigger Crash?

1 month ago
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The crypto market has come under strong selling pressure after the US DOJ sent a subpoena notice to Nvidia wiping out more than $1 trillion from the US markets. All hopes are currently on the Fed rate cuts to boost market liquidity, however, some market analysts believe that it can only provide temporary relief citing underlying weakness in the US economy and the impending US recession.

Fed Rate Cut Won’t Prevent US Recession

With just fifteen days left for the Fed rate cut cycle to begin, market analysts are pointing to historical charts to see what happened during the previous rate cuts. Market analyst Brett (@brett_eth_ highlighted some similarities between the current economic environment and past interest rate-cut cycles from 1981, 1990, 2000, and 2007.

He added that the indicators of a rising unemployment rate along with the 10-year to 2-year yield curve inversion mirror similar trends from the past cycles. The optimism surrounding the Fed rate cut suggests that they could be beneficial for the market. However, Brett shows that history suggests a different development in the making.

Brett added that the market experiences a short-term boost, lasting around 25 days post-rate cuts, followed by an average 13-month downturn. He also added that the market might see one last rally around the upcoming rate cuts. On the other hand, the Bank of Japan plans rate hikes continuing with its hawkish monetary policy. This could put further pressure on the USD and eventually the US markets.

Courtesy: Brett

Will Nvidia Be the Catalyst for the Market Crash?

The Nvidia share price tanked 10% yesterday after the U.S. Department of Justice (DOJ) issued a subpoena for the chipmaker while taking further its anti-trust probe. The latest DOJ probe surrounds Nvidia’s dominance in the AI computing market with antitrust officials sharing concerns that the chipmaker is making it difficult for customers to switch to other suppliers.

Additionally, it implies that the chipmaker could be penalizing customers who don’t exclusively use its AI chips, thereby creating obstacles for competitors. Ahead of the 2000 tech bubble burst, the DOJ launched a similar antitrust probe with market analysts stating that the Nvidia subpoena could trigger the next US recession. Thus, it would be interesting to see whether the Fed rate cut could avoid this situation.

A previous Business Insider reporter suggested that Microsoft is the mystery customer of Nvidia driving 19% of its sales. Well, if true, this won’t go well with the regulators.

The recent crypto market crash has led to strong Bitcoin liquidations with BTC price losing strong support and eyeing for a 75% correction ahead. On the other hand, Peter Schiff presented a chart showing a positive correlation between gold ETF holdings and the price of gold, indicating of a strong gold rally ahead in the making.

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.

Source: https://coingape.com/fed-rate-cut-optimism-wont-prevent-us-recession-will-nvidia-trigger-crash/