Crypto investors have been going through tough times for the past 2 years due to the Federal Reserve’s interest rate hikes. Many altcoins have become history. Numerous crypto companies have gone bankrupt. Now, the Fed has reached the interest rate ceiling and a 100bp cut is expected next year. However, an expert market analyst claims that this will not result in what is believed.
Famous Commentator’s Bitcoin Prediction
In his latest market update, Benjamin Cowen disappointed crypto investors. According to the expert, the Federal Reserve’s interest rate cuts will not trigger the expected rise in Bitcoin and US stock markets.
“As interest rates rose, so did the S&P 500, we saw this from 2016 to 2018. Similarly, Bitcoin rose as well. Now, what you’ll notice in the last cycle is that in December 2018, when the Fed paused interest rates, BTC was at its lows. And the peak in 2019 occurred before the first interest rate cut. So you can see right here. So this cut, you can see, Bitcoin peaked before the first interest rate cut.”
Federal Reserve Interest Rates and Crypto
Crypto markets generally share a high correlation with US stock markets. This is due to tokens being seen as high-risk technology ETFs. So when interest rate hikes began, BTC also fell along with other risk markets. However, while stocks had interim recoveries, BTC was usually late.
The analyst also said:
“Now, this might not be intuitive when you first hear it. Because normally, we think like this: Okay, if there’s an interest rate cut, that means we’re going back to a looser monetary policy and therefore, risky assets should start performing well.
However, if you look at the S&P 500, where we have a lot more data, you’ll see that when interest rate cuts begin, the market usually starts behaving pretty poorly. Here you can see that interest rate cuts basically started when the market reached its peak in August 2007. Here in 2000, the market had already reached its peak before interest rate cuts began.”
According to the analyst, when the rate cut process reaches its end and interest rates hit bottom, the real rally can begin.
“When interest rate cuts begin, it doesn’t mean it’s an immediately rising market. Normally, the first few interest rate cuts made by the Fed are not enough to reverse the economy. And again, the market tends to hit bottom near the time of the last interest rate cut.”
In contrast to Cowen, many experts expect more upward movement during the same period.
