Bitcoin Price Forecast: Fed Rate Cut Might Trigger Short-Term Surge and Correction

Bitcoin Price: What the Fed’s Interest Rate Cut Means for Crypto Prices

Bitcoin Price Forecast – Analysts are closely watching the U.S. Federal Reserve’s upcoming mid-September interest rate decision, anticipating that it could significantly influence Bitcoin’s price movement. According to experts from Bitfinex, the decision could lead to a temporary boost in Bitcoin’s value, but they also caution that this could be followed by a sharp correction as recession concerns grow.

“A 25 basis point cut could mark the start of an easing cycle, while a 50 basis point cut might lead to an immediate spike in Bitcoin prices. However, this spike could be short-lived, with a potential correction looming as recession fears take hold,” Bitfinex analysts shared with The Block.

Recession Indicators and Market Concerns

The market’s current anxiety stems from several recession indicators, most notably the Sahm Rule, which connects rising unemployment rates to recession risks. As job losses increase, consumer spending typically declines, leading to slower economic growth. Furthermore, the inverted yield curve of U.S. Treasuries—historically a reliable predictor of recessions—suggests a 50% chance of a recession within the next year, according to the New York Federal Reserve’s analysis.

Bitfinex analysts predict that if these recession signals start affecting risk assets, Bitcoin could experience a decline of up to 20% from its current price in the weeks following the Fed’s decision. They estimate that Bitcoin might find a new bottom between $40,000 and $50,000. This aligns with BRN analyst Valentin Fournier’s observation that major cryptocurrencies could drop by an average of 4.35% in September. “A Federal Reserve pivot on interest rates usually triggers a ‘sell the news’ event, and the expected cut on September 18 could lead to a dip toward the lower $50,000s,” Fournier told The Block.

Historical Trends and Bitcoin’s Correlation with Traditional Markets

Historical data also supports the likelihood of a brief sell-off following a rate cut. In the last nine rate-cutting cycles, stock markets have typically seen declines of up to 20% within the first month. “Bitcoin’s increasing correlation with traditional risk assets like the S&P 500 suggests its price movements will remain closely tied to global macroeconomic conditions,” Bitfinex analysts added.

Global Economic Factors Adding Pressure

In addition to domestic concerns, global economic conditions are contributing to investor caution. The U.S. housing market, for instance, showed record-low pending home sales in July, despite declining mortgage rates. This suggests that even traditional economic stimulants are struggling to boost activity. Meanwhile, China’s economic slowdown is another critical factor, with the People’s Bank of China implementing targeted liquidity measures to support growth. Bitfinex analysts noted that these efforts could have significant ripple effects across global markets, impacting digital assets like Bitcoin. They particularly highlighted concerns about how China’s slowing growth could affect commodities and emerging markets.

Market Expectations Ahead of the Fed Decision

As the Federal Open Market Committee meeting approaches, traders are betting on the Fed’s next move. The CME FedWatch tool currently shows a 69% chance of a 25-basis-point cut and a 31% chance of a 50-basis-point cut later this month. The outcome of this decision will be pivotal in determining Bitcoin’s short-term trajectory, with both opportunities and risks lying ahead for investors.

FAQ: Impact of Fed’s Rate Decision on Bitcoin