Fed rate cut could push Bitcoin to $45 000
As the United States Federal Reserve gears up to unveil a fresh monetary strategy this September, Bitfinex experts caution that the move could negatively impact Bitcoin's market value.
In Bitfinex's latest analysis, the research team indicates a possible downturn for BTC by as much as 20%, should the Fed opt for a reduction in interest rates. They highlighted that such a decision could have a notable effect on Bitcoin's immediate volatility and its future direction.
Despite Bitcoin's reputation as a safeguard against conventional financial instruments, it remains susceptible to global economic shifts, the analysts observe.
Bitfinex's study shows BTC's value jumped more than 32% since the start of August, largely propelled by traders forecasting lenient statements from the Fed. Yet, a recent change has been observed by Bitfinex's team, with a noticeable sell-off by spot traders, contrasted by acquisitions by futures and perpetual markets enthusiasts.
The report suggests a minor 25 basis point reduction by the Fed might lead to swift market adaptation, potentially fuelling a long-term value increase for Bitcoin as it boosts liquidity and diminishes recession anxiety.
Conversely, a larger 50 basis point slash could momentarily elevate Bitcoin's price by approximately 8%, only to be followed by a significant downturn amid recession worries.
An example of this was in 2019 when Bitcoin's value fell by half after a 50 basis point rate cut, though it eventually found stability.
Yet, Bitfinex's team underscores that the current scenario differs, with Bitcoin having gone through two halving events since and the absence of pandemic-induced economic stresses.
The experts project a 15-20% dip in Bitcoin's value following a rate cut. Referring to historical trends, they note that peak returns in cycles usually fall by 60-70%, alongside a decrease in average bull market downturns.
Based on this, they anticipate Bitcoin's price might hover around $60,000 prior to the rate adjustments, with a possible decline to a range between the low $50,000s and mid $40,000s.
Additionally, they point out Bitcoin's traditionally high volatility in September, with the digital currency showing an average drop of -4.78% since 2013 and peak-to-trough dips averaging 24.6% since 2014.
Despite September's forewarned turbulence, Bitfinex's analysts maintain a positive outlook on Bitcoin, emphasizing that the anticipated volatility brings both challenges and chances for traders.
