US Fed Rate Cut Could Trigger 20% Drop in Bitcoin, Say Analysts

A potential interest rate cut by the United States Federal Reserve, widely anticipated by financial markets, could send Bitcoin’s price downwards instead of the expected boost, according to several market analysts. While many investors are hoping for a price surge following the cut, Bitfinex analysts suggest the move could lead to a significant drop for the leading cryptocurrency, possibly dragging Bitcoin down to levels not seen since February.

Possible 20% Drop for Bitcoin Amid Fed Decision

Bitfinex analysts expressed their concerns in a note dated September 2, cautioning traders about the potential impact of the upcoming Federal Reserve rate decision. “If we were to speculate, we would caution to expect a 15-20 per cent decline when rates are cut this month, with a bottom of $40-50k for BTC,” they wrote.

The reasoning behind this bearish outlook stems from September’s historical volatility for Bitcoin and the added uncertainty brought by the rate cut. The analysts noted that the combination of a rate cut and typical September market behaviour could intensify volatility in the crypto space. “These are uncertain times for traders,” they added, pointing to how macroeconomic conditions could either worsen or negate the forecasted drop.

Historical Volatility in September

September has been a challenging month for Bitcoin in previous years, and analysts say this year is unlikely to be different, especially with the looming Federal Reserve decision. The rate cut, expected to take place on September 18, comes after Fed Chair Jerome Powell’s dovish comments in August, hinting that the time for lower rates had arrived.

Traditionally, interest rate cuts make riskier assets like Bitcoin more appealing as yields from bonds and traditional investments become less attractive. However, analysts caution that this might not be the case this time. At the time of publication, Bitcoin was trading at $57,754, down 2.67% over the past week, according to CoinMarketCap. A 20% decline from its current price would place Bitcoin around $46,000, a level last seen on February 8.

Source: CoinMarketCap

Also Read: 5 Major Crypto Market Trends to Watch Following US Fed Rate Cut

Experts Weigh in on Bitcoin’s Future

Markus Thielen, head of research at 10x Research, has a slightly different take. He believes that Bitcoin might need to drop into the low $40,000 range to trigger the next bull run. “To ideally time the next bull market entry, we aim for Bitcoin prices to fall into the low 40,000s,” Thielen said in early August, signalling that a significant dip could precede the next upward surge.

Meanwhile, other market watchers, such as Joe Consorti from The Bitcoin Layer, noted that Bitcoin’s $60,000 level is now a consolidation zone, where long-term holders are accumulating the asset. “$60,000 is no longer a blow-off top level dominated by speculators; it is a consolidation zone where long-term, mature holders accumulate and HODL,” Consorti wrote in a September 3 post on X.

Similarly, crypto trader Daan Crypto Trades pointed out that Bitcoin continues to hover around its Bull Market Support Band, without making any decisive moves in either direction. “Doesn’t seem to want to move away from it to either side at this point,” he added, emphasizing the current market uncertainty.

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