As a seasoned crypto investor with a decade-long journey through the rollercoaster ride that is the digital asset market, I find myself both excited and apprehensive as we approach the Fed’s rate cut announcement on September 18. The last time the Fed slashed its key rate was amid the COVID-19 pandemic in March 2020, and since then, Bitcoin has shown remarkable resilience and growth.
anticipation builds within the cryptocurrency community as we approach the Federal Reserve’s (Fed) interest rate decision on September 18, which could have significant implications for Bitcoin (BTC) and the wider financial sector. This potential move is the Fed’s first rate cut since lowering its key rate close to zero in March 2020 during the COVID-19 pandemic, making it a crucial event.
Will A 50bps Cut Spark A Bitcoin Bull Run?
As per CME Group’s FedWatch tool, it seems that financial markets are anticipating a potential half-percentage-point reduction in interest rates about 59% of the time, and a quarter-point cut approximately 41% of the time. By the close of 2024, there is a strong possibility that the Federal Reserve could reduce rates by up to one full percentage point (100 basis points), with almost 60% probability suggesting they might even lower it by as much as 1.25 percentage points (125 basis points).
It implies that investors expect there could be one or more significant interest rate reductions during the next three Federal Reserve meetings, beginning with this week’s decision.
The potential effects of a 50 basis point cut remain hotly debated within the crypto industry. Market expert Crypto Rover argues that such a cut could reignite a bull run for Bitcoin, stating that the conditions could lead to “super bullish” prospects.
Analogously, as Bitcoin has historically risen after interest rate reductions, analyst Lark Davis anticipates that similar trends might occur in the coming 6 to 12 months, potentially leading to substantial price escalations for the most prominent cryptocurrency available.
Optimism Vs Historical Caution In Crypto Market
Apart from a positive outlook and high hopes, some analysts also voice warnings. According to EmperorBTC, the initial market surge after the interest rate cut could be triggered due to reduced borrowing expenses.
Yet, the analyst cautions about short-term investors cashing out, potentially causing a drop in the market after a significant announcement. This might result in a “sell the news” situation, leaving numerous investors disappointed before the market recovers and continues its upward trend.
Meanwhile, technical analyst Justin Bennett presents a more cautious outlook based on historical precedent. He refers to the market’s behavior during the Fed’s rate cuts in 2007, noting that the Nasdaq 100 Index experienced substantial declines after the initial reductions. This pattern might repeat itself in 2023, according to his analysis.
Bennett’s interpretation implies a possible similarity between the present market scenario and past economic slumps, casting doubt on the rosy forecasts about the overall digital asset market that some have presented.
Similarly to the report by NewsBTC on Monday, crypto analyst Doctor Profit pointed out an ongoing debate in the market about the potential size of the interest rate cut. He suggests that there’s an even probability for either a 0.25% or 0.50% decrease.
On the contrary, the analyst seems to favor the bigger reduction, warning that inaction might result in chaos similar to “Blood Monday” on August 5, a day when Bitcoin plummeted to $48,900.
In spite of varied opinions within the market, Bitcoin has climbed from its Monday trading value of $57,000 up to a current price of around $61,000 – representing an approximately 6% increase over just a few hours – due to heightened anticipation surrounding tomorrow’s upcoming announcements.
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2024-09-18 05:10