BlackRock is predicting that interest rate cuts may not be as big as the market expects. In a recent note, Jean Boivin, head of the institution’s strategy team, said that negative economic data and investor profit-taking have revived fears of a recession. In addition, uncertainties ahead of the US elections have also triggered this situation.
Interest Rate Cuts and Inflation
Boivin sees inflation approaching the Fed’s targets in the short term, but high inflation in the medium term will limit rate cuts. This has caused 10-year yields to fall to 15-month lows as markets price in aggressive rate cuts. Investors are expecting more than 100 basis points of rate cuts by year-end and around 240 basis points in the next 12 months.
Asset Managers and Crypto Investments
Despite these warnings, many asset managers continue to invest in high-risk assets, especially crypto. Ryan Rasmussen of BitwiseInvest said investment advisors currently hold 6 percent of their portfolios in crypto ETFs, with 4 percent of that holdings in Bitcoin. $57,9742 percent is Ethereum 
$2,344 Markets believe interest rates will be cut to 3.5 percent in the next six months, inconsistent with BlackRock’s assessment.
Strong Recovery in Bitcoin ETFs
Spot Bitcoin ETFs are attracting reinvestment despite previous negative reactions and skepticism. Bloomberg’s Eric Balchunas noted the resilience of Spot Bitcoin ETFs, emphasizing that these investment vehicles are seeing renewed cash inflows. The last trading day saw net inflows of $39 million, with only one day of net outflows this week.
BlackRock’s cautious approach to rate cuts does not align with market expectations. This situation does not seem to have diminished investors’ and asset managers’ interest in risky assets. While crypto ETFs continue to attract investment despite market volatility, the expectation that rate cuts will remain limited seems to affect investment strategies. The course of inflation continues to be an important factor that will affect the Fed’s decisions.
Disclaimer: The information contained in this article does not contain investment advice. Investors should be aware that cryptocurrencies carry high volatility and therefore risk, and should carry out their transactions in line with their own research.
