According to analysts, the much-anticipated interest rate cut by the U.S. Federal Reserve could have an unexpected impact on Bitcoin, pushing it downwards.
In report from the crypto exchange Bitfinex, analysts warned that a rate cut by the American central bank could represent a “challenging moment” for Bitcoin traders.
While a 25 basis point cut is considered the most favorable scenario, as it could “support a long-term appreciation of Bitcoin’s price due to increased liquidity and less fear of recession,” the report warns that a more drastic cut could have the opposite effect.
A more significant cut of 50 basis points could trigger a correction, pushing Satoshi Nakamoto’s currency further downward as “recession concerns intensify.” The analysts also added:
“If we were to make predictions, we would cautiously expect a 15-20% drop in Bitcoin’s price when rates are cut this month, with a potential low between $40,000 – $50,000 for BTC.”
Concerns over a possible recession increased at the beginning of August, when the Sahm Rule economic indicator, used to identify a recession, rose to 0.53 from 0.43 in response to weak U.S. employment data, suggesting an impending recession.
Traders bet on a 25 basis point interest rate cut
As the Federal Open Market Committee (FOMC) meeting approaches, scheduled for September 17-18, most traders on the Polymarket betting platform expect a rate cut.
According to data from the decentralized betting platform, a massive 77% of traders expect a 25 basis point cut during the September meeting.
Bets, which have reached a trading volume of over $10.9 million, also show a 21% probability of a more substantial 50 basis point cut. Only a small minority, 3% of participants, believe that rates will remain unchanged.
Odds of a 50+ bps rate cut just shot up to 32%. pic.twitter.com/6f0McM4GxM
— Polymarket (@Polymarket) September 4, 2024
The decline in inflation and the weakening labor market are fueling expectations of more accommodative action by the American central bank. These factors align with the Fed’s dual mandate of controlling inflation and promoting economic growth.
Most analysts agree on a likely 25 basis point cut, but they do not rule out a sharper reduction if economic conditions worsen.
Comments from Fed Chair Jerome Powell during the annual Jackson Hole symposium have reinforced these predictions, as he stated that “the time has come” for the U.S. central bank to cut interest rates.
According to Lottie Gosling, an economist at the financial services and banking firm Investec, if economic data turns out to be very weak, a 50 basis point rate cut could become more likely. Conversely, strong data could reduce the chance of a larger cut.
“Although Powell did not confirm whether a 50 basis point rate cut is possible in September, we think further labor market deterioration could push the FOMC to consider a more aggressive intervention,” she commented.
Bitfinex analysts also pointed out that September has historically been a “volatile month” for Bitcoin, and a Fed rate cut “could intensify market volatility.”
🚨 Wake me up when September ends 🚨
September has consistently been Bitcoin's worst performing month across its history.
Closing 3/11 Septembers positively
Average month win: 4.1%
Average month loss: 8.1%BTC opened September at ~$59.1k pic.twitter.com/yvp3Yrwlgg
— Greeny 🇦🇺 (@greenytrades) September 1, 2024
Bitcoin: Rise to $100,000 is still possible
If Bitcoin were to drop by 20%, it would reach the $46,000 level, a price point not seen since February 8. This prediction aligns with previous analyses by the analytics firm 10x Research, which identified the $40,000 range as an optimal entry point for the next bull market.
Not all analysts agree on the extent of the potential drop. The well-known crypto analyst Moustache believes the market’s bottom could be around $57,000, based on historical models that help identify key support and resistance levels and possible trend reversals.
I know everyone is waiting for $53,500, but I think the low for $BTC is in here/or very close (~57k), IF it continues to copy the covid 2020 fractal.
Isn't it fascinating?🫡 pic.twitter.com/s5cToTzdWv
— 𝕄𝕠𝕦𝕤𝕥𝕒𝕔ⓗ𝕖 🧲 (@el_crypto_prof) September 2, 2024
A sharp drop in Bitcoin below the $57,000 level would liquidate over $860 million in leveraged short positions, according to CoinGlass data.
Although Bitcoin’s short-term trend may be bearish, an increase above $100,000 is still possible.
The popular trader Titan of Crypto predicted that the last quarter of this year could be a key moment, calling it a potentially “epic” period for price movements.
This prediction is shared by other analysts. For example, Elija Boom reported that a giant inverted “head and shoulders” pattern is forming on the asset’s chart, suggesting that once fully developed, Bitcoin could “soar beyond $100,000.”
Additionally, CryptoQuant CEO Ki Young Ju noted that post-halving rallies tend to start in the fourth quarter of the year in which the halving occurs.
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