Bitfinex analysts caution that Bitcoin could experience a potential 20% drop as the Federal Reserve’s upcoming interest rate decision introduces uncertainty into the market.
The price of Bitcoin might decline by up to 20%, according to Bitfinex analysts, who emphasize that the cryptocurrencyβs future heavily depends on this monthβs Federal Reserve interest rate decision.
In a research report published on September 2, analysts noted Bitcoinβs recent 32% surge, attributing it to speculation of a dovish Federal Reserve stance. They state that the anticipated rate cut could βsignificantly influence both Bitcoinβs short-term volatility and long-term trajectory.β
A 25 basis point cut is likely to mark the beginning of a typical easing cycle, potentially leading to long-term price appreciation for Bitcoin as liquidity increases and recession fears diminish.
However, the analysts warn that a more βaggressiveβ 50 basis point cut might cause an immediate price spike followed by a βcorrection as recession concerns escalate.β
Market Dynamics and Predictions
Over the past week, market dynamics have shifted. Spot holders are currently de-risking, while perpetual market speculators are attempting to βbuy the dip,β as indicated by βsignificant long open interest on BTC perpetuals.β
Bitcoin’s Turbulent Month Ahead
Analysts predict that Bitcoin could face a 15-20% decline following a rate cut, with a potential bottom between $40,000 and $50,000. This forecast is based on historical data showing that cycle peaks in percentage returns typically diminish by 60-70% each cycle, alongside a reduction in average bull market corrections. However, they stress that changing macroeconomic conditions could quickly alter this outlook.
Historically, September has been a turbulent month for Bitcoin, with an average return of -4.78% and peak-to-trough declines of around 24.6%. The analysts highlight that this volatility, paired with the risk of a βsell-the-newsβ reaction post-rate cut, could create βboth risks and opportunities for traders.β
The Federal Reserve will meet on September 17 and 18, and most analysts and experts expect an interest rate cut. However, the extent of the change remains uncertain as the U.S. economy shows signs of steady disinflation and strong consumer spending.
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