- Long-running crypto exchange Bitfinex have released a September report suggesting that Bitcoin might be in for some turbulence.
- The report predicts that the US Federal rate cuts may have a negative short-medium-term impact on the economy, potentially pushing BTC back under US $40k.
- The team argues a more moderate rate cut of 0.25bps could leave Bitcoin poised for a strong back-end to 2024, while a 0.5bps cut may spark recession fears.
- Traditionally, September has been a volatile month for Bitcoin, a trend that appears set to continue.
Bitcoin’s price currently hangs on a knife’s edge, with the coin tantalisingly close to a bullish breakout – but just as close to a short-term bear run. BTC has ranged at around the US $60k (AU $88.4k) mark for the best part of a month now, leaving investors to speculate: Where to from here?
The analyst team at global crypto exchange Bitfinex have taken a gloomy outlook on Bitcoin’s September potential, predicting a potential 15-20% drop before the coin’s price stabilises.
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Larger Rate Cut May Be Good in the Short-Term, But Could Stoke Recession Fears
A lot has been made on the impact of US Federal Rate cuts, predicted to be greenlit in the coming weeks. Although the crypto market is often considered a hedge against traditional stocks, the reality is Bitcoin (in particular) is still intrinsically tied to macroeconomic conditions.
In the lead-up to the September rate cuts, Bitfinex argues investors have priced in the potential 25-bp cut, with BTC gaining 32% since early August.
Suppose the predicted 25 basis point cut goes ahead. In that case, Bitfinex is predicting a more measured economic outcome – and a “long-term price appreciation for Bitcoin as liquidity increases and recession fears ease”.
If the US Federal Reserve really wants to make a dint in the cost-of-living crisis, they may move toward a 50-bp rate cut. In the immediate aftermath, Bitfinex believes this would spike BTC’s price. However, such a drastic cut may be too reactionary and become the catalyst for the recession that spooked the markets back on the August 5th crash.
This would spell bad news for Bitcoin’s price in the medium to long term.
A 15-20% Decline Possible for Bitcoin in Rocky September
Regardless of the exact rate cut the US Fed lands on, Bitfinex is predicting September to be a down month for Bitcoin. The analysts speculate that “we…expect a 15-20 percent decline when rates are cut this month, with a bottom of [US] $40-50k for BTC.”
This figure is based on September’s historic volatility – particularly for Bitcoin – with the month yielding an average return of -4.78%. On top of this, September suffers from a “typical peak-to-trough decline of around 24.6%”.
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In general, Bitfinex believes that Bitcoin isn’t decoupled enough from other financial industries to ignore macroeconomic conditions.
Basically, the release argues that if the Feds cutting rates pushes forward recession fears, Bitcoin could be in some strife. But if interest rate cuts coincide with rising GDP growth and decent inflation metrics, a conservative reduction from the US Feds could be the spark Bitcoin needs to finish the year off strong.
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