- The upcoming U.S. Federal Reserve interest rate decision could cause significant short-term volatility and a potential correction in Bitcoin’s price.
- Historical patterns suggest that rate cuts often trigger a “sell the news” event, potentially pushing Bitcoin toward the $50,000 range.
- The overall crypto market shows signs of weakness, with a “death cross” on the daily timeframe, signaling possible declines in September.
Potential Recession on the Horizon: Will Bitcoin Boom or Bust?
This month’s U.S. Federal Reserve interest rate decision on September 18th could set the stage for a volatile period in the cryptocurrency market. With current rates sitting at 5.25-5.5%, analysts predict that a potential rate cut could trigger immediate price movements in Bitcoin, potentially followed by a correction.
2007-2008:
- Fed Rates: The federal funds rate was indeed at 5.25% at the time of the first rate cut in September 2007.
- Rate Cuts: Between September 18, 2007, and April 30, 2008, the Federal Reserve cut rates seven times, reducing the rate from 5.25% to 2%(
2024 Projections:
- Current Fed Rates: The federal funds rate is currently at 5.25%-5.5%.
- Projected Rate Cuts: The first rate cut is anticipated to begin on September 18, 2024. According to current probabilities, there could be up to nine rate cuts by September 17, 2025, potentially lowering the rate to around 3.25%-3.5%
The Fed’s Rate Cut: Will Bitcoin Survive the Storm?
Historically, rate cuts have led to what’s known as a “sell the news” event, where initial excitement is quickly followed by a dip. Analysts at Bitfinex anticipate that a 25 or 50 basis point cut might cause Bitcoin to spike briefly before potentially correcting by as much as 20%, bringing its value down to the $40,000 to $50,000 range. This aligns with historical data from 2007-2008 when the Federal Reserve slashed rates significantly, leading to similar market reactions.
Crypto Market Facing a Bloodbath? The “Death Cross” Looms
Adding to the market’s fragility, the total cryptocurrency market cap is currently showing a “death cross” on the daily timeframe, a bearish signal that suggests further declines could be on the horizon. With September historically being a challenging month for cryptocurrencies, both Bitcoin and altcoins could face a rough period ahead, testing critical support levels like the $1.8 trillion market cap.
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Written by Matthew Stella. At the time of writing this article, Bitcoin was trading at $59,156.
Disclaimer: The information provided in this article is for informational purposes only and should not be construed as financial advice. The author takes no responsibility for any financial losses incurred as a result of trading or investing based on the information provided. Always conduct your own research and consult with a professional financial advisor before making any investment decisions.
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