Bitcoin could face a significant downturn if the U.S. Federal Reserve implements a highly anticipated interest rate cut, according to a recent analysis by Bitfinex. The report, published on September 2nd, highlights concerns that a substantial rate cut could exacerbate recession fears and negatively impact Bitcoin’s price.
Analysts suggest that while a modest 25 basis point cut may lead to long-term price appreciation due to increased liquidity and eased recession concerns, a more aggressive 50 basis point cut could trigger a sharp correction in the cryptocurrency market. The report warns that Bitcoin could see a decline of 15-20%, potentially pushing its value to a low of $40,000 to $50,000.
Recession worries have been growing since early August when the Sahm Rule Recession Indicator, which tracks economic downturns, spiked following weak U.S. jobs data, signaling a potential recession on the horizon.
With the Federal Open Market Committee (FOMC) meeting scheduled for September 18th, traders are closely watching for any changes in the interest rate. According to Polymarket data, 69% of traders expect a 25 basis point cut, while 27% anticipate a more substantial 50 basis point reduction. Only 3% believe that rates will remain unchanged.
The possibility of a larger rate cut is fueled by recent comments from Fed Chair Jerome Powell at the Jackson Hole symposium, where he suggested that the time for a rate cut had arrived. Some analysts, like Investec economist Lottie Gosling, believe that further deterioration in the labor market could prompt the Fed to opt for a more aggressive easing.
Historically, September has been a volatile month for Bitcoin, and the potential rate cut could add to the market’s instability. Bitfinex analysts emphasize that this period of uncertainty could lead to short-term pain but may also set the stage for long-term gains.
If Bitcoin experiences a 20% decline, its price could drop to $46,000, a level not seen since February. This view aligns with previous analysis from 10x Research, which identified the low $40,000s as an optimal entry point for the next bull market. However, some analysts, like Moustache, believe the market bottom could be around $57,000, citing historical patterns.
Despite the potential for short-term losses, many analysts remain optimistic about Bitcoin’s long-term prospects. They point to the final quarter of this year as a period with “epic” potential for price action, suggesting that a six-figure Bitcoin is still within reach.
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