The US Federal Reserve’s (Fed) interest rate decision this month will significantly impact Bitcoin‘s short-term and long-term trajectory. Analysts predict that Bitcoin will rise briefly after the Fed’s mid-September rate decision, but recession fears will likely lead to a correction.
Bitcoin’s Indicators Point to $40,000 to $50,000 Range
According to analysts, a 25 basis point rate cut signals the start of a traditional easing cycle, while a more aggressive 50 basis point cut could lead to an immediate price increase in Bitcoin. However, analysts warn that recession fears could follow this with a correction. Bitfinex analysts predict that Bitcoin could experience a drop of up to 20% from its current value after the rate decision, potentially bottoming out between $40,000 and $50,000.
Economists are concerned about various recession indicators, such as the Sahm Rule, which links rising unemployment to increased recession risk. Unemployment typically leads to reduced spending and slower growth. According to the New York Federal Reserve Bank’s analysis, an inverted US Treasury yield curve indicates a 50% chance of a recession within the next 12 months.
BRN analyst Valentin Fournier noted that Fed’s rate changes often result in a “sell the news” event, suggesting that the anticipated rate cut on September 18 could push Bitcoin down to the $50,000 level. Fournier forecasts that major cryptocurrencies could drop by an average of 4.35% in September.
Crypto Market Could Mirror Stock Market Reactions
Bitfinex analysts added that the stock market’s initial reaction to rate cuts is usually a short-term rise. Highlighting that past nine rate cut cycles saw drops of up to 20% in the first month, analysts noted that Bitcoin’s increasing correlation with traditional risk assets like the S&P 500 indicates that its price movements will remain closely tied to global macroeconomic conditions.
Investors need to be more cautious during this period of economic uncertainty. Analysts pointed out that July’s US housing market data was at a record low, and even falling mortgage rates failed to revive the market. They also noted that the People’s Bank of China has taken liquidity measures to support slowing economic growth, which could impact cryptocurrencies.
According to the CME FedWatch tool, the probability of the Fed making a 25 basis point cut this month is 67%, while the probability of a 50 basis point cut is 33%.
